Many people believe leasing is an expensive option. This simply is not the case. Therefore even large ‘cash rich’ companies are choosing to lease.
Unlike many high street bank facilities or overdrafts that are subject to the change in market conditions, a lease facility with its protected payment and fixed interest rates allows for effective future budgeting.
100% allowable against pre-tax profits!
Because finance lease rentals are 100% allowable against pre-tax profits, the total cost of your purchase, capital and interest can be offset during the lease period, with your payments deducted as a trading expense. Contrary to popular belief leasing is not expensive, in fact the real cost of your lease can be significantly lower than the payments you make!
A cash purchase will allow tax relief only on the capital allowances on the equipment. This is currently 40% of the cost in the first year and only 25% in subsequent years based on a reducing balance each year.
Types of Lease
Through our finance partners, the Swift Group can offer leasing arrangements regardless of the type of equipment purchased or value. Leasing equipment through Pico makes financial sense in the times of austerity, please see below for a breakdown of the types of lease we offer. You’ll find there is a lease plan to suit every business.
Hire Purchase / Lease Purchase
After an initial deposit regular payments are made over a defined period of time. Ownership passes over at the end of the contract upon payment of an option to purchase fee. Payments can be fixed, or variable rate interest and repayments can be monthly, quarterly or seasonal. Capital allowances are claimed against the purchase with the interest offset against taxable profits.
Similar in structure to Hire Purchase, however, ownership remains with the finance company throughout the agreement. The rentals attract VAT and can be offset against taxable profits as a trading expense. At the end of the agreement you can retain the use of the equipment by payment of a ‘secondary period rental’ or alternatively it can be sold and a percentage of the sales proceeds will be due to you from the finance company.
An operating lease offers the same taxable benefits as a finance lease but differs in that it can be considered an off-balance sheet facility and typically runs for less than the economic life of the asset. At the end of the term the goods are normally returned to the originating supplier or manufacturer.
*Please note that under operating leases the equipment will be subject to ‘return conditions’ and you should always seek the advice of your accountant or tax advisor before entering into this type of agreement.
Sale and Leaseback/Hire Purchase Back
An effective way of releasing capital tied up in fixed assets unencumbered by existing finance agreements. If you would like to discuss any of these types of leases, please don’t hesitate to contact us.