Fixed cost maintenance agreements

If your business has a maintenance agreement on its business cars – these usually accompany contract hire leases – any invoice generated on or after 04 January 2011 will be based on the new 20% VAT rate, so there will be a slight increase in the monthly amount payable.

How much VAT can my business reclaim?

For all VAT registered businesses entering into or currently holding a business type car leasing agreement – such as contract hire or finance lease – usually 50% of the VAT on the rental can be reclaimed. This can be as much as 100% as long as the vehicle is used entirely for business and there is no private usage.

For companies with maintenance agreements, the full amount of VAT can be reclaimed.

For all personal type leases, the monthly lease rate is inclusive of VAT and therefore no VAT is reclaimable.

Further information

You might like to read our special report on How finance lease can help beat the VAT increase.

There’s also a useful tip from Ford’s Kevin Griffin in the Editor’s Blog Side step the VAT increase.

Paul Bulloch is managing director of Concept Vehicle Leasing.