Business Contract Hire (BCH) Explained

Business Contract Hire (BCH) is a cost-effective and tax-efficient way for UK businesses to lease vehicles. It’s ideal for limited companies, sole traders, and partnerships that want to drive brand-new vehicles without the risks of ownership.

This guide explains how BCH works, who it’s for, the financial benefits, and how to get started.

What Is Business Contract Hire?

Business Contract Hire (BCH) is a type of vehicle lease agreement available to VAT-registered businesses. You lease a brand-new car or van for a fixed term and mileage, make monthly payments, and return the vehicle at the end of the contract.

There is no option to purchase the vehicle — making BCH perfect for companies looking to upgrade every few years with minimal hassle.


Who Can Use BCH?

BCH is available to:

  • Limited companies

  • Sole traders

  • LLPs and partnerships

  • Public sector organisations

  • Business owners and directors

Your business must be VAT-registered to qualify for full tax benefits.


How Does PCH Work?

Here’s a step-by-step overview:

  • Contract length: 24 to 48 months

  • Annual mileage allowance

  • Optional maintenance and servicing

  • Typically equivalent to 1, 3, 6, 9 or 12 months’ payments

  • Covers depreciation, road tax, and any included options
  • No balloon payment or resale responsibility

Optional add-ons:

  • Full maintenance and servicing

  • Breakdown cover

  • Replacement tyres

  • Fleet delivery to multiple addresses


What Are the Benefits of BCH?

✔ Reclaim VAT

  • Reclaim up to 100% of the VAT on the monthly rentals (if the vehicle is used solely for business purposes)

  • Reclaim 50% of the VAT if there’s any personal use

✔ Reduce Taxable Profits

  • Monthly rentals may be claimed as an allowable business expense

  • Maintenance packages are also tax-deductible

✔ Fixed Monthly Costs

  • Predictable cash flow with no surprises

  • Road tax included for the duration of the contract

✔ No Depreciation Risk

  • The leasing company bears the depreciation cost

  • Simply return the vehicle at the end of the contract

✔ Easy Fleet Management

  • Add or change vehicles as your business grows

  • Consolidate servicing, repairs and tax into one payment


BCH vs PCH: What's the Difference?

Feature Business Contract Hire (BCH) Personal Contract Hire (PCH)
Available to VAT-registered businesses Private individuals
VAT Reclaim Up to 100% (business only use) Not reclaimable
Tax-Deductible Yes (monthly rentals and maintenance) No
Monthly Cost (net of VAT) Lower due to VAT recovery Higher (VAT included)
End-of-Term Purchase No No
Fleet Management Options Yes No

Your Responsibilities as a Business

  • Ensure your vehicles stay within agreed mileage

  • Keep the car serviced as per the manufacturer’s schedule

  • Maintain fair wear and tear condition

  • Ensure valid business insurance is in place

  • Return the vehicle on time at contract end


Frequently Asked Questions

Yes, but if the vehicle is used for personal use, VAT recovery is limited to 50%.

You will be charged an agreed excess mileage rate, outlined in your lease contract.

Yes. Your business is responsible for insuring the vehicle, either via standard or fleet insurance.

BCH does not include an option to buy. However, we can check with the funder if a purchase quote is available.


How to Get Started with BCH

  1. Confirm your business is VAT-registered

  2. Choose your preferred vehicle and lease terms

  3. Request a personalised BCH quote

  4. Select optional maintenance or breakdown cover

  5. Sign your contract and schedule free UK delivery


Ready to Lease for Your Business?

Our expert team at Stable Vehicle Contracts can help you structure the ideal BCH agreement for your business, whether you're leasing one vehicle or building a fleet.

Get in touch today to discover how much you could save.