Effective Rental

Effective Rental

This is the actual cost of a rental including the disallowable Vat element of a Contract Hire or Finance Lease agreement. Take for example a rental of £100.00 + Vat of £17.50, that's a total payment £117.50. (I am assuming you are a Vat registered business user as personal contract hire is for a non Vat registered user) you can claim half the Vat element on the Finance element back leaving the effective rental at £108.75. The other £8.75 becomes part of the price you pay for living in the UK. In other words its tax.