*FIGURE IS SUBJECT TO VAT (2O%)
* SUBJECT TO STATUS WITH NO DEPOSIT * THIS IS FOR EXAMPLE PURPOSES ONLY
THE BENEFITS OF LEASING EQUIPMENT
Leasing is a smart investment solution which creates flexibility and can benefit your company in so many ways.
- Keep cash flow within the business.
- Get the equipment you want when you
need it, not just when budgets allow.
- Enjoy fantastic tax advantages.
- Keep up with the latest technology.
- Structure your lease payments to suit
your needs and allowances.
- Protect your existing credit lines by using leasing as an alternative funding facility.
WE MAKE LEASING EASY
Investing in business equipment is vital to business growth and market position, so why not choose a method which is easy and beneficial?
We will take care of the administration so that you can get on with day-to-day business.
Throughout the lease process:
- We will liaise directly with your chosen supplier.
- We will create a tailored lease finance package that meets your needs.
- We will do everything to ensure the equipment you need is up-and-running as soon as possible.
LEASE V BUY
What is tax relief?
When leasing equipment a company is able to gain tax relief on 1OO% of their lease rentals against corporation tax.
How does this work and what is corporation tax?
Corporation tax is the tax applied to the companys profit at the end of their financial year, this is generally between 21% - 24%. For every lease rental paid the company is able to claim 21% - 24% in tax relief against the corporation tax, so the business is able to keep the cash rather than paying it to the HMRC.
Company A makes £1OO,OOO profit in their financial year and has to pay corporation tax of 21%:
£1OO,OOO profit minus 21% corporation tax = £79,OOO profit after tax.
The tax the company will have to pay is £21,OOO.
Company B also makes £1OO,OOO profit in their financial year and has to pay corporation tax of 21%.
The company also has £1O,OOO worth of lease rentals for the year:
£1OO,OOO profit minus £1O,OOO lease rentals = £9O,OOO.
£9O,OOO minus 21% corporation tax = £18,9OO.
So Company A pays £21,OOO in tax and Company B pays £18,9OO. Company B has saved £2,1OO in tax.
If a company pays cash for equipment, will they still receive tax relief?
The company will receive tax relief in the form of capital allowances. When purchasing equipment a company will commonly receive a percentage of writing down allowance as a capital allowance.
What is writing down allowance?
A company can claim capital allowances on a percentage of the value of the equipment the company owns, this is called writing down allowance.
If a company pays cash for a piece of equipment which costs £7,5OO, at the end of their first financial year, they can claim 21% in tax relief of 18% of the value of the equipment, which is as follows:
18% of £7,5OO = £1,35O. Of this £1,35O the company can claim 21% against their corporation tax, which is £283.5O.
At the end of the second year, the tax relief they claim will be lower as the equipment has been devalued by 18%.
The new value of the equipment is £7,5OO minus £1,35O = £6,15O.
Of this £6,15O, the company can claim:
21% in tax relief of 18% of the value of equipment:
18% of £6,15O is £1,1O7. Of this £1,1O7 they can claim 21% against their corporation tax = £232.47.
Over a two year period, the company has gained £515.97.
So which is better, leasing or cash purchase?
The company will receive more tax relief if they lease the equipment, as shown by the calculations above.