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Tax Relief
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Tax relief is a government initiative that is designed for business to reduce their corporation tax!
WHAT IS TAX RELIEF?
Tax relief is a government initiative that is designed for businesses to reduce their corporation tax, say your business is making profits of £50k per year, with the UK tax rate being 20% it would mean that you would have to pay a corporation tax bill of £10k.
HOW TO REDUCE YOUR CORPORATION TAX WITH LEASING FINANCE?
If the business was to spend £6k on leasing equipment like software, plant machinery, gaming machines, coffee machines, commercial vehicles, a business would be surprised by the sheer variety of equipment can be obtained on lease!
We spend £6k on leasing equipment, then instead of paying tax on £50k, you would be only required to pay tax on £44k that would be £8,800.00 reducing your corporation tax bill by £1,200.00.
WHAT ARE THE ADVANTAGES OF LEASING EQUIPMENT?
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Your better offer using asset finance than expensive interest rates of bank loans and overdrafts.
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Smaller or no upfront cost when buying expensive assets for the company.
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You can spread the cost over a term rather than having to pay upfront for equipment that you need now.
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When using asset finance to purchase new equipment, you can use the new equipment as the security for the amount borrowed.
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Depending on what asset finance package you have gone for, the depreciation value will be the lenders responsibility and if anything goes wrong with the equipment, the equipment must be replaced at the lenders cost.
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You don’t have to use your own capital that may come handy in the foreseeable future.
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Depending on what asset finance package you have gone for, it shall be the responsibility of the lender to service and maintain the equipment purchased under the asset finance package.
For further information on asset leasing finance, please click here.
If you are going to own the equipment at the end of the lease, this then becomes supply of goods to the business meaning that you shall have to pay tax on the whole amount from the start of the lease agreement.
If you VAT registered and you want to reclaim the tax, you shall have to account for the VAT when reselling the equipment.
If you don’t buy the equipment and only lease, then for tax purposes the equipment becomes supply of a service.
If you are leasing a vehicle, the tax is restricted over leasing equipment. For full details on tax relief for commercial vehicles, please visit the government website at: https://www.gov.uk/reclaim-vat/cars
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Information provided by the government HRMC website:
https://www.gov.uk/guidance/vat-capital-goods-scheme-and-capital-assets
https://www.gov.uk/guidance/vat-capital-goods-scheme-and-capital-assets
Use the Capital Goods Scheme if you reclaim VAT on capital items like expensive land, property or computer equipment.
Overview
If you acquire or create an expensive capital asset, or already have one when you register for VAT, you may have to adjust the amount of VAT you reclaim. You do this by using the Capital Goods Scheme, which allows you to spread the initial VAT claimed over a number of years. You can reclaim more if the proportion of your taxable supplies’ increases, you’ll have to repay some if it decreases. Taxable supplies are the sales that you make which are standard, reduced or zero-rated.
Overview
If you acquire or create an expensive capital asset, or already have one when you register for VAT, you may have to adjust the amount of VAT you reclaim. You do this by using the Capital Goods Scheme, which allows you to spread the initial VAT claimed over a number of years. You can reclaim more if the proportion of your taxable supplies’ increases, you’ll have to repay some if it decreases. Taxable supplies are the sales that you make which are standard, reduced or zero-rated.
The scheme applies if you spend £50,000 or more (excluding VAT) on purchasing, constructing, refurbishing, fitting out, altering or extending an aircraft, ship, boat or other vessel.
Certain changes to your business during a Capital Goods Scheme period will impact on the treatment of your capital assets. These changes include:
- leaving or joining a VAT group
- cancelling your VAT registration
- buying or selling your business
- selling an asset during the adjustment period
- your business moving into or out of a VAT group
The assets that are included in the scheme are:
- land, buildings and civil engineering work
- computers and computer equipment
- aircraft, ships, boats or other vessels
You’ll have to use the Capital Goods Scheme if you spend £250,000 (excluding VAT) or more on:
- buying land, a building or part of a building or civil engineering work
- constructing a building or civil engineering work
- refurbishing, fitting out, altering or extending a building or civil engineering work
The scheme only applies to individual computers, or items of computer equipment, that cost £50,000 (excluding VAT) or more.
It doesn’t cover something like a network where the total cost of the server and all the computers and printers is £50,000 or more but each individual item is less than £50,000.
Nor does it cover computerized equipment (for example, a computerized telephone exchange or computer-controlled blast furnace) or computer software.
It doesn’t cover something like a network where the total cost of the server and all the computers and printers is £50,000 or more but each individual item is less than £50,000.
Nor does it cover computerized equipment (for example, a computerized telephone exchange or computer-controlled blast furnace) or computer software.
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