Hire Purchase
What is it?

Allows customers ownership from Day 1 for tax and accounting purposes. Goods are invoiced to the Bank/Finance Company and the customer normally pays fixed instalments over an agreed period of 2-5 years. At the end of the agreement full title passes to the customer. The VAT is normally paid on signing the agreement.
Benefits

· You can claim ownership allowance (WDA) as a charge against tax liability.
· Fixed repayments enable accurate budgetary and financial control.
· Economic ownership can help maintain Balance Sheet value.
· Particularly effective with second hand or long life equipment.
· Documentation and arrangements with suppliers are relatively simple.

Leasing

What is it?

Tax Based Leasing is a long-term hire arrangement between the customer and the Bank. The customer pays rental for the use of the equipment and at the end of the hire period the goods can either be retained for an extended secondary period or alternatively, disposed of. Companies can benefit from a proportion of the sale proceeds upon disposal. This is particularly suited to longer-term transactions for large items of machinery linked over 5-7 years.
Benefits

· Rentals are normally lower than Hire Purchase instalments as they reflect the effect of the Bank claiming ownership allowances.
· Customers can benefit from sale proceeds.