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It is always best to refer the customer back to their accountant or adviser; however, there are some special rules regarding the VAT deduction of lease rentals on cars:
- If the customer is VAT registered and the car is solely for business use (not available for private use), then 100% of the VAT may be reclaimable on the lease rental.
- If the customer is VAT registered but the car is made available for private use, then 50% of the VAT on the lease rental can be reclaimed.
- If the customer elects to take the SMR (maintenance) element, then 100% of the VAT chargeable on the SMR should be fully recoverable subject to normal VAT rules.
NB The non-claimable element of VAT is sometimes referred to as "Blocked VAT"
If the customer is not VAT registered, there is no reason why they cannot have Contract Hire; they will just not be able to claim back any element of the VAT