“Hire or Lease Purchase is a simple facility which allows the customer to spread the cost of their investment and to gain title at the end of the agreement, either automatically or on payment of an option to purchase. For tax purposes, from the beginning of the agreement the business customer is considered as the owner of the equipment and can therefore claim capital allowances. Repayment interest is usually offset against profit.”
Mike Lowe – Managing Director
VAT on the purchase is typically paid at inception meaning that all the VAT is reclaimable at the end of that VAT quarter. So with the right timing and a VAT-only deposit cash flow remains largely unscathed.
Now there are different ways of structuring Hire Purchase agreements for your convenience, and we have a full range of products including:
Variable Rate HP – Payments terms can increase or decrease with Banking Base Rates, and interest is calculated daily.
Fixed Rate HP – Your payment terms won’t fluctuate with Banking Base Rates, so you can budget more accurately.
Structured Payment Profile – we can consider:
VAT Deferral – Pay the VAT on month 2 or 3 of your agreement to coincide with your VAT quarter
Seasonal Payment Profile – If your business is seasonal a payment profile to reflect your busy periods can be negotiated
Decreasing Payment Profile – Pay more of the capital back in the early period, leaving lower payments towards the end when maintenance costs may be higher.
Lease Purchase – Build in a ‘balloon’ payment into the agreement, reducing your monthly expenditure. You will have less equity at the end of the loan.