Over the coming pages we will explain why leasing is the best option for upgrading your company’s equipment and technologies. We will walk you through the benefits, the process and answer a number of frequently asked questions to help you make a more informed decision about your next upgrade. There is a lot of information on the internet about leasing, so we hope this concise guide helps you to properly weigh up the options and dispel any myths that may have popped up during your research. Of course, we are on hand to address any additional questions you may have, be them about leasing, the requirements or how we work with your Supplier.
SO, WHAT IS LEASING?
Leasing is quite simply the process of acquiring equipment via third-party finance and paying for it in manageable monthly amounts over a pre-agreed term. It’s like a loan, only the loan is secured by the assets you have acquired, which allows for a lower rate of interest. We work with a number of Suppliers and third-party lenders, enabling you to get financing for the equipment you need today, without laying large sums of money upfront. By paying for the equipment monthly you will be preserving your hard-earned working capital and not tying money up in ever-depreciating assets. Most importantly, Leasing allows you to invest your money in more profitable activities – which enable your business to grow.
WHAT ARE THE BENEFITS?
Putting your hard-earned money to better use is the #1 reason businesses lease office equipment. Here are some others:
- • It is cheaper than buying outright (once tax relief is accounted for)
- • Afford the best quality – no compromises
- • Flexible tenures from 12 – 84 Months
- • VAT is charged on the smaller payments and not the large fee at the start • Tax allowable — rentals are an operating expense and so are 100% tax deductible
- • Payments are fixed for the term
- • One rental can include all equipment and ancillary costs i.e. consultancy, installation, training and maintenance
- • Keep your credit lines intact — Leasing does not affect any of your existing credit lines
- • You are free to upgrade, make additions, or settle the finance agreement at any point
- • Flexible options at the end of the Lease – including indefinite ownership
WHAT’S THE PROCESS?
It’s really quite simple. First of all, tell your equipment Supplier what it is that you require and inform them that you wish to be quoted a lease option. If your Supplier has a leasing Partner in place then they will be able to offer you a range of payment options, including monthly, quarterly, and tenures from 1 – 7 years. If they do not have a Leasing Partner then you can simply refer them to Lease Group, who will happily provide the options on their behalf. Confirm the tenure that best suits your budget and soon after, your finance agreement will arrive via email. Upon completion of the paperwork your Supplier will deliver the equipment and then your instalments will begin (paid by Direct Debit). At the end of the lease you will be given the option to keep, upgrade or return the equipment, it’s that simple!
WHAT CAN BE LEASED?
Leasing is applicable to a great number of equipment and technology types, including software. Here’s an example of the things that can be offered via Leasing:
- • Desktop Phones
- • Telephone Systems
- • VOIP licenses
- • Mobile Phones
- • Tablet Computers
- • Servers & Networking
- • Laptops
- • Desktop Computers
- • Copiers & Printers
- • Peripherals (headsets, keyboards etc.)
- • Telecoms & IT Software
Many business customers are delighted to find that professional services can also be included in the Lease. So if your upgrade requires installation, setup, training or maintenance fees, these can be broken down into monthly payments too!
WHAT ARE THE REQUIREMENTS?
As long as your equipment totals £1,000 (ex VAT) or more then you qualify for the lease option. Prior to paperwork being sent we will perform a quick credit check on your business to ensure we can secure funding for the amount required. As will be itemized in our Lender Ts & Cs, your equipment will need to be insured; otherwise the Lender will add insurance for you. This gives you and the Lender added security in case any of the equipment gets lost, damaged or stolen during the term. Do not worry though, the equipment is usually already covered in your building and contents insurance, 97% of the time this is the case. Due to the Consumer Credit Act, it can be easier and quicker to arrange finance if your company is registered as one of the following:
- • Limited Company
- • LLP
- • PLC
- • LEA School
- • Any organisation in the public sector
- • Partnerships of 4 or more partners
HOW DOES TAX RELIEF WORK?
As highlighted on the benefits page, leasing qualifies as an operating expense to your business and so is 100% tax deductible. This means, at the end of each financial year you can deduct Leased expenditure from your tax bill, giving you greater profits! Example
Company A is looking to purchase new telecoms equipment for its Sales force. The supplier has offered them two options, either to buy the equipment outright or to utilise a lease option. Assumptions:
- • Equipment Price: £7,374
- • Lease Period: 3 Years
- • Frequency: Monthly
- • Company’s Tax Rate: 30%
Tax relief is only available on the capital allowances on the equipment.
Year 1 – 25% of £7,374 = £1,843 – Less 30% = £553.00
Year 2 – 25% of £5,531 = £1,383 – Less 30% = £415.00
Year 3 – 25% of £4,148 = £1,037 – Less 30% = £311.00 Total tax relief: £1,279.00
Tax relief is available on all rentals, in this case at a rate of 30%.
Year 1 – 12 rentals of £252.00 – Less 30% = £908.00
Year 2 – 12 rentals of £252.00 – Less 30% = £908.00
Year 3 – 12 rentals of £252.00 – Less 30% = £908.00
Total tax relief: £2,724.00 By choosing to Lease, Company A would gain over £1,400 more in tax relief when compared with a cash purchase.
HOW IS TAX RELIEF ACCOUNTED FOR?
When a business leases their equipment they are able to gain relief on 100% of the lease rentals against its corporation tax. This means, for each and every lease payment made the business can claim 20%+ in tax relief against its corporation tax, keeping the cash in the company as opposed to handing it over to the HRMC!
Corporation Tax to be paid: 21%
Profit after tax: £100,000 – 21% = £79,000
Total Tax paid: £21,000
Corporation Tax to be paid: 21%
Lease Rentals to be paid: £10,000
Profit after Lease Rentals: £90,000
Total Tax paid: £18,900
Company A pays £21,000 while Company B pays £18,900 in corporation tax.