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Hire Purchase / Lease Purchase
A straightforward repayment facility where the customer will ultimately own the asset. Repayments can be structured in a flexible way using a deposit, initial payments and/or a 'balloon payment' (final lump sum). The full VAT is payable at the commencement of the agreement. Key features and benefits: Ultimate ownership. Ownership normally carries the potential for claiming writing down allowances and/or capital grants, including any enhanced first year allowances of 40% of the capital cost & then 25% per annum on a reducing balance basis. VAT on the cost of the asset is normally reclaimable. The interest can be fixed or variable interest rate. The interest element of repayments can normally be offset against taxable profit. The asset appears on your balance sheet.

A popular, flexible method of funding, which offers all the practical benefits of ownership.

Key features and benefits:

• When the asset is sold you normally receive the majority share of the sale proceeds, typically 95%.
• The flexible repayment structure gives you immediate and full use of the asset for a minimal outlay.
• Rentals can normally be offset 100% against taxable profit, spread over the economic life of the asset, typically 5 years.
• Asset treated as 'on-balance sheet', showing as an asset.
• VAT is paid on the rentals not the purchase price.

A residual value in the machine tool typically reduces the rentals, thus helping cash flow and making 'off-balance sheet' funding possible. This type of agreement is effectively a long term rental.

Key features and benefits:

• The customer bears none of the residual risk on the equipment's value.
• Rentals can normally be offset 100% against taxable profit.
• Asset normally treated as 'off-balance sheet' (subject to your auditors' approval).