Both options require a financial arrangement where you pay a funder over a predetermined term, allowing you to access an investment that you might not be able to afford through cashflow. Leasing means the funder permits usage of the equipment over the timeframe by the practice paying a set rental, and hire purchase is a type of arrangement where a practice buys equipment from the funder over a fixed term, making fixed re-payments.

Which product is best for your practice will depend on variables such as equipment ownership and how you’d like to account for the equipment. Hire purchase is suitable for businesses who want to own the equipment at the end of the fixed term, while leasing is better for businesses less concerned about asset ownership. Leasing does still offer a route for ownership at the end of the fixed term, though it is not automatic and usually for an agreed cost paid by the practice once the agreement ends.

Different types of equipment finance are accounted for differently on your books and tax allowances, and a good idea is speaking to your accountant about what type of asset finance is best for your practice.

• Hire purchase and lease offer fixed payments over a fixed term contract. It is important you understand what the re-payments will be and over what timeframe you will be making those re-payments. Re-payments vary based on the cost of the equipment and interest rate, and reasonable contract lengths are available, which are typically between one- and seven-years.
• Whether you select hire purchase or lease, your contract will end on a pre-determined date. There are options to settle your contract early and without penalty. Which arrangement you choose will determine what happens at the end of the contract.
• Your monthly re-payments should be affordable, and it is important to consider whether the re-payments are manageable over your preferred contract term.
• A credit check is made at point of application to establish eligibility for finance. Your credit score effects eligibility and approval for hire purchase and lease.
• Equipment finance can offer tax benefits which you could make use of.
• Seeking independent guidance to establish if hire purchase or lease is right for your practice.

• Applications are subject to a credit check. This may appear on your credit report.
• Non-payment can result in you losing the asset through the funder reclaiming the asset. Your credit score could be affected by non-payment.
• An administration fee is usually charged at the inception of the agreement.

There will be times when a business decision requires the endorsement of a professional adviser, especially an accountant, who should already know their customer’s exact tax position. Most accountants, tax advisers, finance brokers, and Independent Financial Advisers (IFA’s), will be pleased to provide professional advice and it is recommended this advice is sought.

Most of the major business expenses are linked to new equipment or other material premises costs. As technology improves and new diagnostic equipment is developed, there will be times when new equipment is required. Care should be taken in deciding how to pay for and account for the purchase of new equipment, especially if it is likely to increase income and profit levels in future years. Using cash, loans or HP will ensure high initial First Year Capital Tax Allowances (AIA) may be claimed and this enables a large mitigation of payable tax in the year the investment is made.

Specialist lease Finance will offer a unique spread of tax benefits over the whole term of the contract. Leasing enables a ‘drip-feed’ of tax relief and this is equalised over the entire contract term, typically 2-7 years. Leasing and rental finance contract neatly offsets future profits as a business operating expense at maximum tax rates. Leasing is usually ideal for new start practices.

In most business environments, considerations are made to leasing any equipment or goods that depreciate. This allows any spare cash to be used for more beneficial purposes, such as pension top-ups, general cash flow, software, sundries or paying off lump sums from longer-term and secured business loans.