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 IFAs (Independent Financial Advisers), 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 equalized over the entire contract term, typically 2-7 years. Leasing and rental finance contract rather neatly offset future profits as a business operating expense at maximum tax rates. Leasing is usually ideal for new start practices.
In most business environments, we should be 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.