Hire Purchase

After all the payments have been made, the
business customer becomes the owner of the
equipment, either automatically or on
payment of an option to purchase fee.

For tax purposes, from the beginning of the
agreement the business customer is treated
as the owner of the equipment and so can
claim capital allowances.

The business customer will normally be
responsible for maintenance of the
equipment.

Leasing

The fundamental characteristic of a lease is
that ownership never passes to the business
customer.

The leasing company claims the capital
allowances and passes the benefit on to the
business customer, by way of reduced rental
charges.

The business customer can generally deduct
the full cost of lease rentals from taxable
income, as a trading expense.

As with hire purchase, the business customer
will normally be responsible for maintenance
of the equipment.

There are a variety of types of leasing.