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Sale and Leaseback Infomation
What Is Sale and Leaseback?
This option enables you to release the capital tied up in vehicles you already own outright by transferring them to a contract hire or leasing agreement.
How Does Sale and Leaseback Work?
Under a Sale & Lease Back arrangement you sell the vehicles to
the leasing company for an agreed price and these same vehicles are
seamlessly leased back to you, typically using a Contract Hire arrangement.
This enables you to switch to a more tax efficient method of funding
whilst raising capital for use elsewhere within your business. As
this is a paper only exercise you continue to have use of the vehicles
throughout the transfer process and thus there is no driver inconvenience
involved.
How Is Sale and Leaseback Accounted For?
Under a Contract Hire agreement, rentals paid on vehicles under £12,000
are fully deductible against corporation tax. However, for higher
priced vehicles only a proportion of the payments can be offset.
Where a vehicle has a partial private use then 50% of the VAT on
rentals is recoverable, whereas the service and maintenance elements
of the rental are fully recoverable.
Vehicles under Contract Hire are not recorded on the balance sheet
thus improving company gearing ratios.
