Business Contract Hire
Business Contract Hire (BCH) is an agreement between a company and a car leasing firm to lease any number of vehicles, in this case electric cars or vans.
There are many advantages to electric car Business Contract Hire. Costs are predictable and fixed each month. At the start of the contract an initial rental is agreed upon (a multiple of the monthly lease), the car is chosen and the desired annual mileage set. Maintenance may or may not be included, while some companies will also offer insurance and smart charger installation as part of the package.
The savings with electric vehicles are considerable, the running costs or “fuel” cost being the main one. Charging at home using an EV-friendly, off-peak tariff can be as cheap as 3p per mile (as at March 2023), meaning a 50-mile trip can be done for just £1.50. With diesel prices at about £1.70 per litre (as at February 2023) the same trip at 50mpg could cost about £7.70.
One of the most significant benefits of BCH, and one reason why so many companies run their vehicles this way, are the considerable tax savings and other advantages.
- The monthly rental fee can be offset against the company’s taxable profit. And with an electric vehicle, there’s no taxation penalty for carbon emissions.
- If the car (or commercial vehicle) is used purely for business, 100% of the VAT on the monthly lease is refundable; it’s 50% if it is used for both business and the personal use of the employee. Cars normally get the 50% rebate, and vans or lorries the full sum.
- The VAT can also be reclaimed on the maintenance element of a BCH agreement if that’s part of the package. However, your business must be VAT registered.
- Additional fees, such as end-of-contract wear and tear charges or those for excess mileage can be offset against tax.
- You won’t have to pay company car tax if you’re a sole trader or have a Limited Liability Partnership (LLP).
- Running costs will be lower compared with a diesel or petrol car when travelling into Clean Air Zones (CAZs) as electric vehicles are exempt from charges.
All in all, Business Contract Hire for electric vehicles is worth considering if you’re upgrading your fleet or starting a new business and wondering how to provide your employees with vehicles.
Find out more about Business Contract Hire with ElectriX and CBVC.