Leasing is quite simply the process of acquiring equipment via third-party finance and paying for it in manageable monthly amounts over a pre-agreed term.

It’s like a loan, only the loan is secured by the assets you have acquired, which allows for a lower rate of interest.

We work with a number of Suppliers and third-party lenders, enabling you to get financing for the equipment you need today, without laying large sums of money upfront.

By paying for the equipment monthly you will be preserving your hard-earned working capital and not tying money up in ever-depreciating assets.

Most importantly, Leasing allows you to invest your money in more profitable activities – which enable your business to grow.

Leasing is applicable to a great number of equipment and technology types, including software.

Here’s an example of the things that can be offered via Leasing:

As long as your equipment totals £1,000 (ex VAT) or more then you qualify for the lease option.

Prior to paperwork being sent, we perform a quick credit check on your business to ensure we can secure funding for the amount required.

As will be itemized in our Lender Ts & Cs, your equipment will need to be insured; otherwise, the Lender will add insurance for you. This gives you and the Lender added security in case any of the equipment gets lost, damaged or stolen during the term.

Do not worry though, the equipment is usually already covered in your building and contents insurance, 97% of the time this is the case.

Due to the Consumer Credit Act, it can be easier and quicker to arrange finance if your company is registered as one of the following:

Leasing qualifies as an operating expense to your business and so is 100% tax-deductible.

This means, at the end of each financial year you can deduct Leased expenditure from your tax bill, giving you greater profits!

Example

Company A is looking to purchase new telecoms equipment for its Sales force. The supplier offers them two options, either to buy the equipment outright or to utilise a lease option.

Assumptions:

• Equipment Price: £7,374
• Lease Period: 3 Years
• Frequency: Monthly
• Company’s Tax Rate: 30%

Cash Purchase

Tax relief is only available on the capital allowances on the equipment.

• Year 1 – 25% of £7,374 = £1,843 – Less 30% = £553.00
• Year 2 – 25% of £5,531 = £1,383 – Less 30% = £415.00
• Year 3 – 25% of £4,148 = £1,037 – Less 30% = £311.00

Total tax relief: £1,279.00

Lease Rental

Tax relief is available on all rentals, in this case at a rate of 30%.

• Year 1 – 12 rentals of £252.00 – Less 30% = £908.00
• Year 2 – 12 rentals of £252.00 – Less 30% = £908.00
• Year 3 – 12 rentals of £252.00 – Less 30% = £908.00

Total tax relief: £2,724.00

By choosing to Lease, Company A would gain over £1,400 more in tax relief when compared with a cash purchase.

When a business leases their equipment they are able to gain relief on 100% of the lease rentals against its corporation tax.

This means, for each and every lease payment made the business can claim 20%+ in tax relief against its corporation tax, keeping the cash in the company as opposed to handing it over to the HRMC!

Company A

• Profit: £100,000
• Corporation Tax to be paid: 21%
• Profit after tax: £100,000 – 21% = £79,000
• Total Tax paid: £21,000

Company B

• Profit: £100,000
• Corporation Tax to be paid: 21%
• Lease Rentals to be paid: £10,000
• Profit after Lease Rentals: £90,000
• Total Tax paid: £18,900

Company A pays £21,000 while Company B pays £18,900 in corporation tax.