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Funding solutions

There are many different types of funding solutions for both the individual and business user., In partnership with the major finance companies Square1 leasing and finance limited are in the enviable position of being able to offer a full range of these options , so if you are an individual looking for a vehicle or a business looking for one or more vehicles please give us a call. Listed below are the full range of funding solutions offered by Square1 Leasing and Finance Limited.

Contract Hire

Under Contract Hire, vehicles continue to be owned by the leasing company yet are hired to you for a set period of time and at a fixed monthly rate. This method of finance can be useful for companies wanting to free up credit lines or improve cash flow by implementing fixed cost fleet operation.

The monthly rental charged is calculated based upon the cost of the vehicle, the contract period and the anticipated resale value. It is also takes into consideration the predicted mileage, service and maintenance costs, together with any additional services such as relief vehicles. Under a Contract Hire agreement the funder retains ownership of the vehicle at all times and therefore continues to absorb the subsequent risks such as unforeseen running costs and uncertain resale values.

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 as assets on the balance sheet, thus improving company gearing ratios.

Personal Contract Hire

Some companies are now looking at Employee Car Ownership (ECO) schemes as a viable alternative to regular funding methods. These schemes provide a mechanism for the driver to take personal ownership of their vehicle yet benefit from group buying power and tax efficiencies.

The car is financed through a Credit Sale Agreement between the driver and leasing company. The employer pays the driver a monthly allowance which relates to the employee level and their choice of car. Taking this allowance together with the personal tax savings, as well as utilising Inland Revenue approved business mileage allowances, provides the driver with a net monthly budget.

The driver has greater choice as they can trade up or down from their current company car level and pay more or less per month as appropriate. The employer can benefit from a reduction in the gross cost of providing drivers with a vehicle. However this is strongly influenced by the make up of the fleet and in particular the number of business miles conducted by a driver. Generally speaking, drivers need to be in the 10,000+ business miles bracket for this to be an effective choice.

As the foundation for ECO schemes is a direct contract between the leasing company and the driver, there are no corporate accounting regulations to adhere to. If an employee receives any form of cash allowance, this is treated as salary from a tax and national insurance perspective. Mileage allowances can either be paid up to the Inland Revenue limit or drivers can make a claim through their regular tax return.

Finance Lease

Finance Lease is a tax efficient option where you choose to pay either the entire cost of the vehicle, including interest charges, over an agreed lease period or opt to pay lower monthly rentals with a final payment based on the anticipated resale value of the vehicle.

At the commencement of the contract, usage parameters for the vehicle are agreed, and assuming this does not vary, monthly payments and interest rates are fixed for the duration of the contract. Therefore you benefit though fixed costs but do take on the administration and operating risks. At the conclusion of the contract you can continue to operate the vehicle under a "peppercorn agreement" although you will at no time take ownership of the asset.

Although the ownership of the vehicle remains with the leasing company for the duration of the contract, the car does appear on your balance sheet with the capital element of the outstanding rentals acting as the subsequent liability. The rentals paid can be offset against taxable profits, although a proportion of the payments relating to the excess value of the vehicle over and above £12000 are disallowed.

Contract Purchase

Contract Purchase offers the facility to purchase vehicles over a predetermined period of time and at fixed monthly costs, without taking the depreciation risks normally associated with ownership.

The monthly payment takes into consideration the cost of the car, anticipated depreciation and mileage, as well as any service and maintenance options you wish to include. At the end of the contract, ownership can be retained by making a final balloon payment. Alternatively the vehicle can be returned for resale by the funder, with no further payments due.

The vehicle appears as a balance sheet asset for the duration of the contract, meaning that you can claim capital allowances at the rate of 25% per year on the reducing asset value of the vehicle (up to a maximum of £3000 per annum). However, unlike Contract Hire VAT is not recoverable on the monthly payments. For vehicles over £12,000 a balancing charge or allowance is made on disposal of the vehicle, thus generating tax efficiencies by allowing for the full depreciation amount.

Lease Purchase

Lease purchase is a method of financing a vehicle, normally for vat registered businesses or companies. The monthly rental is determined by the cost of the vehicle, the period and the estimated future value of the vehicle which is based on the proposed annual mileage.

A payment equivalent to the estimated future value is payable at the end of the contract, when the vehicle becomes the property of the leasee. Maintenance packages are often available, if required. Lease Purchase is a cheaper monthly alternative to Hire Purchase, the traditional method of financing, and is written on a hire purchase agreement with the protections afforded by the consumer credit act.

The finance element of the payment covers depreciation and funding. Specifically designed for non VAT registered and VAT exempt businesses. Lease purchase allows the reward of ownership. Lease purchase offers a business the facility of balance sheet declaration which may help gearing and long term taxation plans.

Sale and Leaseback

Sale and Leaseback enables companies currently owning rather than leasing their vehicles to release the cash value of the fleet. This value can be fixed to suit profit and loss reporting requirements.

Square 1 Leasing and Finance Limited in conjunction with one of the many finance partners purchases the fleet and leases it back on agreed terms. This provides a business in today's complex and stressful financial environment with an alternative method of obtaining a cash injection when needed, along with the benefits of removing the day to day management of a vehicle fleet.

Personal Contract Purchase

Some companies are now looking at Employee Car Ownership (ECO) schemes as a viable alternative to regular funding methods. These schemes provide a mechanism for the driver to take personal ownership of their vehicle yet benefit from group buying power and tax efficiencies.

The car is financed through a Credit Sale Agreement between the driver and leasing company. The employer pays the driver a monthly allowance which relates to the employee level and their choice of car. Taking this allowance together with the personal tax savings, as well as utilising Inland Revenue approved business mileage allowances, provides the driver with a net monthly budget.

The driver has greater choice as they can trade up or down from their current company car level and pay more or less per month as appropriate. The employer can benefit from a reduction in the gross cost of providing drivers with a vehicle. However this is strongly influenced by the make up of the fleet and in particular the number of business miles conducted by a driver. Generally speaking, drivers need to be in the 10,000+ business miles bracket for this to be an effective choice.

As the foundation for ECO schemes is a direct contract between the leasing company and the driver, there are no corporate accounting regulations to adhere to. If an employee receives any form of cash allowance, this is treated as salary from a tax and national insurance perspective. Mileage allowances can either be paid up to the Inland Revenue limit or drivers can make a claim through their regular tax return.

Hire Purchase

The vehicle becomes the property of the lessee at the end of the period. The monthly payment is determined by the amount of deposit paid, the period of the contract and the sale price of the vehicle.

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