Further reading:
• An Overview of Leasing
• Schools, Hospitals, & Government Depts

Our company buys the 10 new laptops for a total of £10,000 + VAT, Immediately they are £11,175 down but as they are VAT registered they can claim the VAT back at the end of the current quarter in 3 months time.

And that's it, your money is tied up in the new equipment, so if you had other plans for the £10k then your going have to get it from else where. Over the the next three years our company can claim back 25% of the balance per year

Initial Purchase Price £10,000

• Year 1
25% of £10,000 = £2500 - Balance = £7,500
• Year 2
25% of £7,500 = £1875 - Balance = £5,625
• Year 3
25% of £5,625 = £1,406 - Balance = £4,219

So at the end of the laptops 3 year working life our company has been able to claim £5781 against pre tax profits. Even though the lease rental has hire costs of £2348 + the £10,000 over the 3 years the ability to claim all of this back compared to the £5781 for the outright purchase shows the tax benifits of leasing.

Our company leases the 10 new laptops over a 3 year period paying 1 initial payment of £343 + VAT, then 35 monthly payments of £343 + VAT. So out of their original £10,000 + VAT budget they still have £9657 to spend on stock which they can sell for a profit, something that could not have been done if they had bought outright, that continues in ever decreasing amounts of the next 3 years giving them plenty of opportunity to make more money whilst having the use of the new equipment which helps them to become more efficient and more profitable. This really is a case of having your cake and eating it.

But there's more, not only does our company have the money to spend on more stock, the payment they make on the lease are 100% tax allowable against any pre-tax profits. As shown below

Year 1 100% of £4,116 (12 x £343)
Year 2 100% of £4,116 (12 x £343)
Year 3 100% of £4,116 (12 x £343)

Total that can be claimed back against pre tax profits is £12,348