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

Confirm your business is VAT-registered
Choose your preferred vehicle and lease terms
Request a personalised BCH quote
Select optional maintenance or breakdown cover
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.

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