Cash versus Lease Example

Cash versus Lease

You're looking to buy some new tools & equipment for your garage or workshop. You have found the products on the CCW-Tools website and you now have two options, either to buy the equipment outright for cash or to use leasing.
The following example shows the tax benefits of leasing the equipment over a number of years versus the tax relief you would receive if you were to purchase it directly by either Credit / Credit card or Paypal.

For examples of different prices and terms please click Here.

Assumptions:

Equipment Price: £5,250
Lease Period: 3 years
Frequency: Monthly
Company's Tax Rate: 30%  

Cash Purchase
Tax relief is only available on the capital allowances on the equipment.
Year Capital Allowance Tax Relief
1 25% of £5,250 = £1,312.50 Less 30% = £393.75
2 25% of £3,938 = £985.00 Less 30% = £295.50
3 25% of £2,954 = £739.50 Less 30% = £221.85

Lease Rental
Tax relief is available on all rentals, in this case at a rate of 30%.
Year Rentals Paid Tax Relief
1 12 rentals of £178.50 Less 30% = £642.60
2 12 rentals of £178.50 Less 30% = £642.60
3 12 rentals of £178.50 Less 30% = £642.60

Equates to:
  Cash Purchase Lease Rental
Total tax relief: £911.10 £1,927.80

By choosing to lease, the company would gain over £1,016.70 more in tax relief when compared with a cash purchase.
Assumption that company can claim the Full Rate Corporation Tax.

This is for example purposes only. Always consult your professional advisors.

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