Is Hire Purchuase a Fixed Asset?

A bit confused here...
If Ltd company buy a Van on Hire Purchase Agreement, should that Van be recorded in Fixed Assets and be depreciated?

Because as far as I understand Hire Purchase means that you do not own your asset till you actually repay that in full. So how you can depreciate something that you do not actually own?

Thanks everybody!

You have entered a contract on behalf ofd the business. It is a business asset and should be included for depreciation. It is your van unless you default on payments. You can also claim against the loan.

With a HP you can't claim against the loan

The interest is allowed as a tax deductible expense (unlike in a Finance Lease) and you can claim capital allowances on the invoice cost of the vehicle (again unlike a Finance Lease)

In a Finance Lease you have to add back the interest charge and claim tax relief on the actual repayments made in the year. You can't claim capital allowances though.

The tax relief works out the same in the end provided that the tax rate doesn't change

For accounts purposes Hire Purchase and Finanace Leases are teated the same, you "own" the asset and have a liability against it in the balance sheet, youu report the substance of the transaction over the form of it.

There are differences in the tax treatment.


I've assumed you were asking the accounting treatment, from the wording of your question.