Leasing & Hire Purchase – What Are They?
Leasing and hire purchase are finance facilities for business to use an asset over a fixed time period, for regular payments. The business customer chooses the equipment and the finance company buys it on behalf of the business. Leasing The fundamental characteristic of a lease is that ownership never passes to the business. The leasing company claims the capital allowances and passes the benefit on to the business, by way of reduced rental charges. The business can generally deduct the full cost of lease rentals from taxable profits, as a trading expense. As with hire purchase, the business will normally be responsible for maintenance of the equipment. Hire Purchase After all the payments have been made, the business becomes the owner of the equipment, either automatically or on the payment of an option to purchase fee. For tax purposes, from the beginning of the agreement the business is treated as the owner of the equipment and so can claim capital allowances. The business will norm
