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Tax
Benefits
You have the opportunity
to be constantly updating
through equipment lease. This
way you can make use of the
latest technology . It is a
well known fact that
technology changes very fast
and with that there is always
a risk involved when you buy
an asset. But when you choose
to use equipment leasing,
there's no need to worry, as
you can upgrade to the new
technology every couple of
years.
Example:
Cost of goods
£10,000
3 Year lease @ £963.20
per quarter (1+11)
Total payable = £963.20
X 12 =
£11,558.40
You pay
£1,558.40
over 3 years in
interest
Lease is 100% tax deductible
so assuming tax rate is
25%
£11,558.40 X 25% =
£2,889.60
Therefore, the lease is
effectively self-financing
and the reduction in tax to
be paid (£2,889.60),
more than covers the interest
charge (£1,558.40)
Plus ...
You have had the use of the
original £10,000 for
the last 3 years!
| Leasing vs
Borrowing |
| Leasing |
Borrowing |
- Minimal down
payment
- Primary period to
match asset
depreciation
period
- Leasing rental
100% deductible
against tax
- VAT is paid each
month on the rental
and is therefore
effectively
deferred
|
- Cash flow
impact
- Capital allowance
restriction means
that effectively may
take up to 10 years
to ulitimately offset
the allowances
- Fixed deposits
can be as high as 25%
plus all VAT due
- May restrict
further borrowing
from bank lines
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iLease
have provided
