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I am currently looking at leasing a piece of equipment which costs approximately £20000 including VAT. I am not VAT registered, but I am a Ltd Company. There is an option to buy at the end. The period will be five years. There are 2 options, they will fully service and maintain or that will fall to me. Now my question is, are lease payments fully tax deductible and if so/not how do I treat them in the accounts? And on My CT return.

Many thanks for your help.


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31st Dec 2012 13:15

Lease or purchase?

Is the option to purchase in the agreement itself? And what is the amount of payment required for the purchase?

Just trying to find out if you're entering into a lease or a hire/lease purchase agreement. (What does the title of the agreement document say?)

Thanks (1)
to tom123
31st Dec 2012 14:18

It is not mentioned specifically in the agreement, but the person I was speaking to mentioned that they (the lease finance provider) would either issue a new hire agreement or you could pay to keep the equipment. It is a lease agreement.


Leasing is the only real option as the equipment is the most practical option for my company.

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By neileg
31st Dec 2012 14:00


If you aren't VAT registered then leasing is usually a more expensive option since you are paying VAT on the interest element. If you use HP or lease purchase then you still can't reclaim the VAT on the equipment but the installments are exempt so there's no VAT on the interest.

Of course the VAT treatment isn't always the deciding factor.

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