Financing Equipment

3. The Tax Position

The tax position depends partly on whether the deal will eventually give you ownership of the equipment, and partly on your own tax position.

3.1 If you are going for a purchase agreement:

• You can claim capital allowances.
• You can offset the interest element of the payment against your taxable profits.
• If you are VAT-registered, you can generally reclaim the VAT on the capital cost of the asset.

3.2 If you are going for a lease agreement:

• You cannot claim capital allowances.
• You can offset the rental payments against your taxable profits.
• You can reclaim the VAT on rentals (if you are VAT-registered).