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Discussion Starter · #1 ·
Just trying to read the BCH contract. Came across this:

"If for any reason there is a change in the nature, method, time of levying, application or practice of taxation in relation to any tax, including VAT and also capital allowances and any other duties, levies and other like charges such that there is a reduction in our after tax rate of return on the funds from time to time invested in this Agreement or a reduction in the net proceeds of sale of a Vehicle, then the Hirer will, if called upon to do so, pay by way of additional Rental plus VAT, an amount which gives Us the same amount of return as if such changes had not occurred. Our determination of any additional Rentals required pursuant to this clause will, except for obvious error, be conclusive and binding on the Hirer."

Sounds a bit open-ended as a risk for me to take on: if HMG levies a tax that means the leasing company makes less profit than it expected to make from this contract, then the leasing company can bill me for the difference. And it can choose how much that amount will be.

Or do I have the wrong end of the stick?
 

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Totally normal.

I was refunded when the annual road tax dropped. So it works both ways.
 

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The only upcoming tax that might affect this is Corporation Tax rising from the present 19% to 25% from April 2023.
6% sounds quite substantial, but that doesn't mean your payments will increase accordingly.
The likelihood is, it could have no bearing on your payments at all, but even if it does they are likely to be negligible.
If you are a first time EV user you will be making a huuuuge saving on electricity costs over diesel or petrol, so won't even notice.
 

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I would be very concerned about the "net proceeds of sale" clause. For a PCP the risk of future value lies with the finance company, but this looks like you as a lessee would be accepting this risk.
Not something I would want to do.
 

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The only upcoming tax that might affect this is Corporation Tax rising from the present 19% to 25% from April 2023.
6% sounds quite substantial, but that doesn't mean your payments will increase accordingly.
The likelihood is, it could have no bearing on your payments at all, but even if it does they are likely to be negligible.
If you are a first time EV user you will be making a huuuuge saving on electricity costs over diesel or petrol, so won't even notice.
The problem there is that their view of the impact on their rate of return is binding. As a customer, it would be very difficult to show they had made a mistake.
 

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Just trying to read the BCH contract. Came across this:

"If for any reason there is a change in the nature, method, time of levying, application or practice of taxation in relation to any tax, including VAT and also capital allowances and any other duties, levies and other like charges such that there is a reduction in our after tax rate of return on the funds from time to time invested in this Agreement or a reduction in the net proceeds of sale of a Vehicle, then the Hirer will, if called upon to do so, pay by way of additional Rental plus VAT, an amount which gives Us the same amount of return as if such changes had not occurred. Our determination of any additional Rentals required pursuant to this clause will, except for obvious error, be conclusive and binding on the Hirer."

Sounds a bit open-ended as a risk for me to take on: if HMG levies a tax that means the leasing company makes less profit than it expected to make from this contract, then the leasing company can bill me for the difference. And it can choose how much that amount will be.

Or do I have the wrong end of the stick?
Tell them to shove it sideways.😠
 

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The problem there is that their view of the impact on their rate of return is binding. As a customer, it would be very difficult to show they had made a mistake.
Realistically, with agood accountant there should be no reason why a change in Corporation Tax changes anything.
You give with one hand and take with the other, so to speak.
 

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That may be true, but if the finance company tell you that change A has reduced their rate of return by £B and that this will cost you an extra £C, you would have difficulty proving them wrong.
 

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That may be true, but if the finance company tell you that change A has reduced their rate of return by £B and that this will cost you an extra £C, you would have difficulty proving them wrong.
You would never be given the opportunity to prove them wrong: you have signed away your rights...
 

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You could probably get it removed as an unfair contract term due to its vagueness. They would need to have given specific examples such as if vat rate changed, or if a Corp tax change happened. As it stands, they could charge you for the profit reduction due to the Minimum Wage rising in April.
 
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You would never be given the opportunity to prove them wrong: you have signed away your rights...
The contract states "if they have made a mistake" which you would have prove. Certainly something that would put me off anyway.
 

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It's fair enough that they protect themselves against a significant change to the treatment of capital allowances and VAT, as those are critical to the way lease contracts are calculated. I don't think they're getting out of the commercial risk about the proceeds of sale, just a change in tax that affected it (the VAT second-hand margin scheme being scrapped, for example). But it is a bit sweeping, eg on corporation tax charges. I'd also question whether it is an unfair term - that would certainly put the boot back on the other foot if challenging them. I'd only do it if they were picking up on something like the Corporation Tax change, though.
 

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It's fair enough that they protect themselves against a significant change to the treatment of capital allowances and VAT, as those are critical to the way lease contracts are calculated. I don't think they're getting out of the commercial risk about the proceeds of sale, just a change in tax that affected it (the VAT second-hand margin scheme being scrapped, for example). But it is a bit sweeping, eg on corporation tax charges. I'd also question whether it is an unfair term - that would certainly put the boot back on the other foot if challenging them. I'd only do it if they were picking up on something like the Corporation Tax change, though.
Wether the clause is weird or normal in some ways is not the point. Presumably the OP can walk away if not happy with the proposed liabilities.
 

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You can always walk away, but it depends what other options are open to you. I'm lucky enough to be at a stage where I'm buying outright for cash these days, but that wasn't always the case. It's not the sort of contract where you can negotiate the removal of a clause you don't like.
 
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But this it what it says in the OP

"...there is a reduction in our after tax rate of return on the funds from time to time invested in this Agreement or a reduction in the net proceeds of sale....."

Have I interpreted that wrong?
 

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Discussion Starter · #17 ·
Thanks all, I'll catch up later and answer the queries.

The 'proceeds of sale' thing made me wonder if it's a cut-n-paste error from a PCP contract. The clause is far too open-ended to agree to, so I will have to ask them directly, and push them to be specific.
 

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But this it what it says in the OP

"...there is a reduction in our after tax rate of return on the funds from time to time invested in this Agreement or a reduction in the net proceeds of sale....."

Have I interpreted that wrong?
The whole thing is dependent on there being a change in tax that has caused it, though. I think the reference to net proceeds of sale is there precisely because it's the ex VAT price that they are concerned with, and if the resale value stays the same but the VAT went up their calculations would be adrift. So they aren't getting out of the commercial risk that the car might not be worth as much as expected second hand, they are getting out of any risk that the proportion lost in tax would change.
 

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When a clause like that has any element of uncertainty, it has to be clarified in writing. As it stands they just have to say some change which includes "the net proceeds of sale" will cause your payments to increase. Your only get out is if they have made a mistake which you would have to prove. I am not saying your interpretation is wrong, just that the wording could mean something different.
 
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