Congratulations, you made it to 2014 – It’s a good year to be tax efficient and start buying some things – NOT!
If your car is newer than your computer equipment then you are probably making the same mistakes as RBS, Lloyds and 36% of the businesses who are using XP.
Lets face it, business has not been good or moving in an upward direction since 2008. Yes things are more optimistic now but you may be one of the many businesses facing some problems, for some it is cash flow, for others its funding the extra business, lets face it there is now a danger of overtrading, where you don’t want to run out of liquidity. You also probably know deep down that you need new IT equipment, there are two temptations, buy the cheapest possible or soldier on until it breaks. OUCH! that’s expensive.
Neither are real options, so you have decided to choose the right equipment from the right supplier but you didn’t realise how expensive computer equipment is, surprise, surprise, its gone up since 2008
Sourcing funds to buy “stuff”
You have a few options, use your cash or borrow it, certainly in an upturn you can make enough money to fund the borrowing but with the bank charging 6.5% for a low cost loan and credit cards still charging 20%+ it doesn’t make much sense, especially if you can only claim a small amount back against tax.
There is a way that works, you can claim everything against tax and spread your cost over a few years. Because interest rates are low its a good time as the rate is fixed at the time you sign the deal you won’t get a shock when interest rates go up.
Lets look at £10,000 of equipment, which is a mid range server, some PC’s installed with software.
If you pay cash, you have taken that out of your cash flow. You may have to borrow the money and you can only claim back 20% back against tax. The borrowing rate may also change.
To lease the equipment over four years it will cost you £70 a week. Over four years it works our around 4.4% interest per annum and you can offset all the payments against tax. There is a residual buy back agreement that allows you to buy the equipment at the end of the term, usually for one quarters payment.
If you want to protect your cash flow, spread your costs, save money and have maximum tax efficiency then its the best way to have some “stuff”
WE are we going on about it now, simple really, before 2008 it was cheap to borrow money and no one needed leasing as everyone was rolling in cash and life was good so we stopped offering leasing in 2000. It makes more sense now than ever, low interest rates and a need to keep cash flow going, especially for companies damaged in th recession it makes perfect sense for us to start offering leasing again.
We are the intermediary, we don’t get commission or any benefits but we like to offer our clients something that the others don’t. Experience tells us what is the best choice for our clients.