Leasing computers for business – the tax benefits explained
Confused about the tax benefits of leasing your computers?
You are not alone – but for a growing business the benefits can be very real.
To explain what they are, we’ll compare what happens when you pay up front for your computer, and what happens when you enter a lease agreement instead. The figures we’ll be using exclude VAT (which you can, of course, claim back if you’re VAT registered) and are, of course, given only as a guide.
Buying your computer
Let’s say you’ve chosen to buy a well-specified MacBook, with a price (at the time of writing) of £1,249.00,
Because HMRC see this as a capital investment, you can’t simply claim it as an expense. But its value will decrease over time – like any capital investment – so you can claim the depreciation against tax at the end of each year as a capital allowance. Currently the amount you can claim is 18% each year: so at the end of the first year you can claim £224.82.
At the end of the second year you can again claim depreciation, against a notional value of £1,024.18 – which takes into account the depreciation you’ve already claimed in Year 1. So in Year 2 your depreciation claim will be £184.35.
At the end of Year 3, similarly, you can claim your next 18%, based on the remaining value of £839.83. So your claim this time will be just £151.17.
At this point you may well want to replace the computer; so you will either need to find a buyer, or dispose of it in some other way. But you are unlikely to sell it for its book value, assuming you can sell it at all.
So at the end of Year 3 you have:
• Paid £1,249.00, up front – leaving you that much less to invest in other areas of your business
• In terms of your tax benefits, claimed £560.34 against tax – over three years
• Had to take time and effort to sell, or otherwise dispose of, an asset that has lost almost half its value.
Tax Benefits When leasing your computer from Qube
Computer leasing from Qube will mean there is no big upfront cost for your equipment. You simply start paying your regular monthly fee. For the MacBook we are using as an example, that will be £46.45. The tax benefits are clear, because every penny of that fee can be claimed back against tax.
Which means that at the end of Year 1 you will be able to claim £557.64. (Bear in mind that if you’d bought the computer, it would have taken you three years to claim almost the same amount.)
And of course, you can claim the same figure back, again, in Years 2 and 3. With the added benefit that at the end of Year 3 you can simply return the computer to Qube – and start again.
So by the end of Year 3 you have:
• Paid £46.45 every month, out of cashflow
• In terms of your tax benefits, claimed back a total of £1,672.32 – the full cost of your lease payments – over three years
• ‘Disposed’ of the computer safely and securely, by making a single phone call.
Too good to be true?
Not really. If your business is growing, this is indisputably the best way to buy your IT equipment – as many accountants we’ve spoken to will confirm. But of course you should check with your own accountant first to ensure that it’s right for your own particular circumstances.
In the meantime, if you’d like to know more then do give us a call on 0333 990 8080.