Hi
A lease is a monthly rental. The van and/or the equipment you lease belongs to the leasing company and you rent it from them.
The van is registered to the leasing company and it never becomes yours - its never registered to you.
In essence all leases are viewed as assets on your books. Rental vehicles and those on hire (Contract Hire) are not and the full monthly rental is subtracted from your profit and loss account.
At the end of the contract the van returns to the leasing company and provided you have upheld your side of the deal, ie stayed within any mileage restrictions and return the vehicle in a satisfactory condition - fair wear and tear considered, you have no further claim to that vehicle.
As such the total rental is 100% tax deductible as it isn't an asset on your books. (Private use of the vehicle then needs to be calculated in the normal way.)
There is also another lease which is sometimes called a finance lease and the monthly payments are designed to clear the value of the van to zero by the end of the contract. At the end of the contract you are responsible to sell the van and what ever you sell it for is for your back pocket to use as a deposit for the next rental. The 'profit' you make in this instance is taxible. This type of lease is used for builders (usually vehicle destroyers), taxis and couriers (high mileages). To further reduce monthly payments some leases have a final balloon payment, so your business needs to be able to afford that final payment blow if the valve of the van is less that the final balloon payment.
It differs from an HP (sometimes called a purchase lease) contract where the van is registered in your name and this becomes an asset in your books. As such is value is written down annually against tax - ie 40% in the first year and then 25% each year afterwards. (You can't claim your monthly payments, but there is a concession with regard to the interest portion of the loan.)
There are several variants to the leasing scenario but the basis is a rental based on the original purchase of the van and an anticipated value (residual value) of that same van at the end of the lease period with that preagreed mileage. A van doing 10k annually would be worth more than a van doing 25k annually, so the monthly payments would be less on the lower annual mileage.
In the old days the finance houses would never finance the VAT element of the van purchase price - assuming that a VAT registered company would claim that back, and would also require a 10% deposit of the purchase price of the van before VAT. So buying a van for none VAT registered businesses would mean quite a cash outlay. Leasing a van would reduce that outlay as the usual terms profile is 3/35 or 3/47. First payment is generally 3 times the monthly payment over 3 or 4 years + VAT.
You have to go into any leasing deal with your eyes wide open. You are tied into a contact for that period of time and trying to get out of it early can prove very expensive - rule of thumb was about 6 months rental in the early stages of that deal. Finding the van too small can be an expensive mistake. Closing the business or going bankrupt is not looked on favourably either.
Rectification of any body (including holes drilled in the floor to secure equipment) and/or mechanical damage accessed at the end of the contract is for your account, and you will be required to service the van at a recognised service outlet to the manufacturers schedule during the rental period. Failure to do so could also prove costly. You will find that BT and British Gas leave the shelving etc fitted to their vans behind at the end of the contract, as the repairs are more costly that the second hand value of the accessories. You will also need to Fully comprehensively insure the van for the contract term as well.
Look on the
www.peugeot.co.uk wedsite, click on Services & Finance tab, then Fleet, then Finance Your Fleet. On that page you will find a complete rundown on all business finance, pros and cons and tax implications. It's invaluable.
Spruce