I have a client who has asked me the regarding the above and what would be the best one to choose, normally I deal with ltd company's to final accounts then I pass to my contact to do the return and filing. When it comes to questions like this, I am lacking the knowledge. (I'm still learning!)
I dont thing this is an easy answer without the figures and some knowledge about the client.
under HP, you will get AIA's based on level of other purchases. You will be able to claim the VAT back at the start. You will generally pay a slightly higher deposit or initial payment (probably the VAT element).
Under operating lease, you will get a tax deduction for your monthly payments, you will claim VAT back from your monthly payments. You wont get AIA / capital allowances.
Need to consider, monthly payments for cashflow, who owns the leased van at the end of the period, who is responsible for repairs and other costs if the asset is leased, how much interest is being charged on the HP and are you getting a good deal on the HP interest?
These are a few things you should be looking at, Im sure other people will have points to make but the above is the initial info I would be looking at.
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Forgive the typo's I generally do not proof read. Just lazy I guess!
really complex, thank you for your answer. Thought I would also mention the client is actually a friend, I will need to explain that it isn't an easy decision, and what you have put above and let them make the final decision, I think I will tell them it is their decision at the end of the day. etc etc.
-- Edited by lor on Wednesday 4th of August 2010 07:21:37 PM
Hi lor, As Adi says there are different tax treatments so it is important to glean from your friend what he wants, eg short term cash flow advantage, final ownership etc. Whatever he needs to actually say to you 'I have seen a Ford Transit and on lease it costs £x per month for 3 years and I've also seen one on HP which costs £Y' At least you can look at the figures with him. There may even be other options open to him. Without this information you can just explain the tax treatments.
