Key Post: Lease or Hire Purchase?

We're looking at buying new plant & machinery. From a CT perspective, can leased assets be written off faster than non leased??

If memory serves me, you cannot claim capital allowances on leased assets? Is this correct?

Thanks all

Re: Leased assets & capital allowances

You can't claim capital allowances on leased assets.

However, as you get to write off the lease payments as you pay them, you will normally write off leased assets quicker.

Re: Leased assets & capital allowances

Just wondering, does this apply to Hire Purchase as well. My accountant told me HP is the way to go when leasing vehicles for business as you can write off the costs over the term of the deal, say 5 years. But I've been reading a lot of info on car dealer sites and they suggest that you can only claim capital allowances at 12.5% when on HP.

He's on holidays now so can't check with him

Re: Leased assets & capital allowances

Capital allowances are currently at 12.5%, ie written off over 8 years. Leasing in generally more tax efficient, as you dictate the lease term and lease payments are tax deductible. Also if your registered for VAT, you can reclaim the VAT on the lease payments.

Re: Leased assets & capital allowances

So is HP treated the same as leasing? i.e. the vehicle is not an asset and is not claimed as a capital allowance, but as an expense as you outlined.

Re: Leased assets & capital allowances

No. The main difference between HP and leasing is that you can write off the cost of the asset (ie in your case the vehicle) over a shorter time frame. Hire-purchased assets also tend to cost more.