Financial Services

Sale & Lease Back What Is It? 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 It 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 It 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. Financial Services