Vat treatment of Purchasing machinery

Hi,

Can someone please explain the VAT treatment when purchasing Business Machinery either through 1) Business Loan, 2)HP or a 3)Lease. We are purchasing the asset from a Vat registered person but checking out the different finance options available to us.

Thanks

1. Loan, get VAT invoice off the seller and reclaim VAT @ your next vat return.
2. HP. It is the finance house that is purchasing . You use Finance Houses invoice to reclaim VAT @ your next vat return.
3. Lease , you only reclaim your Vat on your repayments eg cost k10 + VAT 23% = 12300.
repay on the 12300 eg 6 Half yearly @ 2233 each six mths.
After half yearly payment you reclaim the vat portion of 2233= 417.55
(generally avoid leases unless accountant advises otherwise)

1. Loan - VAT claimed upfront based on date of supplier invoice
2. HP - VAT claimed upfront based on date of supplier invoice
3. Finance Lease - VAT claimed on a monthly basis. No VAT claimed upfront

Gerry (Usain Bolt) Canning beat me to it!

Thank you all very much for the reply!

I know the capital allowances can be claimed on the net about at 12.5% but would the treatment of capital allowances differ depending on the type of finance used?

If the asset is purchased through a Finance Lease then there is no Capital Allowances claimable

Instead you add back the interest charge in the corporation tax computation and claim tax relief on the Net element of the actual Finance Lease repayments

So if your lease is over 3 years then you actually get tax relief on the cost of the asset over the 3 years as opposed to 8 years

Capital Allowance treatment for loan or HP is the same as normal (12.5% over 8 years)