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Finance lease and capital allowances

Finance lease and capital allowances

Can you claim capital allowances on assets, in this case a bus, that are being purchased through a finance agreement. Also can the vat be reclaimed in fulll at the start of the lease even only a small deposit has been paid and most of the vat will be included as part of the monthly repayment?

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By BKD
14th Jun 2012 10:43

What kind of agreement?

The title of your post refers to finance lease, yet your question says that the bus is being purchased. Which is it?

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By Ned
14th Jun 2012 10:52

It is a finance lease, but my understanding is that at the end of the 4 year term the bus will be owned by us having completed the lease.

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By BKD
14th Jun 2012 10:59

If it's a lease ...

... it's a lease, and so no capital allowances can be claimed by the lessee. VAT payable on rentals will be recoverable when paid.

But how will ownership be passed to you at the end of the lease? If the agreement provides that an option payment can be made so that title passes to you, then it's not a finance lease - quite possibly a lease purchase agreement. Although the terminology may be similar (and confusing) the two types of agreement are quite different in their tax treatment.

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By Ned
14th Jun 2012 11:10

Basically an assosiated company has lent the money to the group company to buy the vehicle but the intention is for the company that has borrowed the money to own the asset, so how is this best achieved ?

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By BKD
14th Jun 2012 12:45

Moving goalposts

That last question is quite different to the one originally posed.

What do you mean by "best achieved"? Cheapest? Most secure? Most tax-efficient?

I'm happy to advise on the tax implications of a specified course of action. Not so happy to provide free advice on how to save money/tax - speak to your accountant/tax adviser for that. If you don't have one, get one.

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