Save Your Capital, Have You Considered Leasing?
Why should you use leasing? Take a look at these 5 Fundamental reasons
1. Leasing is a means to pay for any capital purchase with low fixed monthly rentals, which means you can budget and manage your cash flow in a more cost efficient manner.
2. It is a way of managing obsolescence without writing off large single sums.
3. Leasing allows you to invest your money in other areas where you will get a higher return on capital employed.
4. It is the route to bridging the gap between what you need and actually can afford. It means you can have the office you want today.
5. Rentals are fully allowable against taxable income, similar purchases are not.
These are just a few of the reasons why 8 out of 10 accounting firms use leasing and why 85% of the Times Top 100 companies use leasing. You will certainly be making a wise decision if you decide to join them.
Want to work out like leasing costs, please download our excel lease calculator...
A lease can work out more cost effective than paying cash
If your organisation is looking to finance a capital equipment project then using your hard earned cash can be just what the taxman wanted. He will not let you offset the full amount of the cash you spend against your next corporation tax bill but instead give you allowances piecemeal over the coming years.
Leasing the equipment may appear to cost more, however when leasing you will benefit from 100% allowances against tax, which means you will be pocketing a substantial gain at the taxman's expense and leasing thus becomes cheaper! You will also benefit from being able to invest the free cash you would have otherwise spent in other areas of the business.
Cash v Lease Illustration
The example below seeks to illustrate the total costs of a cash purchase versus those of a rental option based on a 36-month term. It assumes rentals are paid monthly in advance, by Direct Debit and all costs are based on net present value.
Total cost of project £150,000.00
Cost after the writing down tax benefit £133,175.06
Total cost of project £150,000.00
Rental per month £4,800.00
Total payable £172,800.00
Net cost rental stream £112,863.59
Less opportunity cost of investing money elsewhere £18,898.38
Therefore net cost of leasing £93,965.21
Leasing is cheaper than cash by: £39,209.85
Customer Corporation tax rate 20%
Customer first year writing down allowance 40%
Customer Discount rate 12%
Customer return on capital employed 10%
All figures ex VAT and subject to credit approval
Tax rates and percentages are applicable at time of writing (2009/2010)
Who can benefit from Leasing Furniture & Interiors?
Typically Sole Traders, Partnerships, Limited Companies, PLC’s, Charities and Educational Establishments
What is the minimum order value?
£1000 + VAT
What is the maximum order value?
There is no maximum
What is the length of the Lease?
Typically 12 to 36 months but it can be anything from 1 to 7 years
Is a deposit required?
1 to 6 months rental dependent on the type of lease
Can the Whole Turn Key Package be financed?
Yes, you can lease any of the following mix; office furniture, storage, seating, demountable partitioning, cabling, Cat2 lighting, air conditioning, carpet tiles, suspended ceiling, blinds, refurbishment costs, alarm and security systems, mezzanine flooring and any asset as part of your entire furniture and interiors solution
What is the treatment with VAT?
Lease rental - VAT paid with rentals
Lease Purchase - All VAT Amount payable upfront with 1st rental
What are the payment patterns?
Monthly, quarterly, annually, bi-annually – you can choose the most suitable
How can I make payments?
Direct Debit or Invoice
Is it possible to upgrade the equipment during the term of the lease?
Yes – an upgrade option is available
What are the options at the end of the lease?
● Take title of the equipment for a nominal fee
● Return the equipment
● Carry on with a peppercorn rental
Leasing can work out more cost effective than paying with cash
By paying for your furniture and the refurbishment of your offices from your cash flow, only a limited percentage is available for tax purposes. This is because the revenue only allows you to offset 65% of the capital cost against your capital allowances. However, if you go down the lease rental route this will allow you to offset the full 100% of repayments against your corporation tax bill. This is the only form of borrowing where this is possible, and as such makes it the most tax efficient method of paying for your furniture and refurbishment works.
Inflation Proof
Lease rental payments are fixed from the outset and are therefore inflation proof, which enables you to precisely calculate, and budget for future costs.
Call our sales team on 029 20681130 or email sales@officeimageltd.co.uk to find out more.
