A finance lease is a flexible tax efficient way for your business to acquire the assets it needs without using up valuable cash reserves. You spread the cost of purchase by renting the asset rather than purchasing it. The lessor (finance company) purchases your asset and then rents it back to you.
The rental payments are calculated over an agreed term and are tax allowable against your profits. The lessor retains the right to any capital allowances.
The Main Advantages of a Finance Lease:
- Low initial outlay – for just a small outlay, you can use the assets immediately.
- Fixed payments for the whole agreement 100% tax deductible.
- Flexible repayment structure – rental payments can be tailored to match your cash flow.
- Fixed or variable interest options – you decide which suits you best.
- Tax advantages – VAT is payable on the rentals, not the purchase price, while payments can normally be offset against taxable profit (special rules apply to cars).