It’s what you do with it that counts
To some, ownership isn’t everything. An operating lease is a lease with fixed instalments reflecting a predicted future residual value, which is an amount that remains unpaid by you; therefore, instalments are reduced.
The residual risk is taken by JCB Finance, which will attempt to sell the asset at the end of the term in order to realise this unpaid amount. You are protected by any potential loss in value of the asset (subject to return conditions), and this transfer of risk may allow you to treat the asset as off balance sheet, which may facilitate significant improvements on some of the key accounting ratios such as return on capital employed. Speak to your accountant or tax advisor to see how this may apply to your individual circumstances.
Operating leases typically enjoy a low initial capital outlay, and the VAT, which is paid on each instalment, is therefore spread over the period of the lease. If a qualifying asset is used for business purposes, and you are VAT registered (special rules apply), you may be able to recover some or all of the VAT applied to the lease rentals.
The instalments may be offset against taxable profits, which may be a tax-efficient form of leasing for your business. The availability and value of tax relief will depend on your individual circumstances; you can request a copy of the contract terms without any obligation so that you can discuss this with your accountant or tax advisor.
Return conditions apply; you will not own the asset at the end.
Service, repair and maintenance contracts may run alongside your operating lease, helping you to spread the cost and budget accurately; speak to your local JCB dealer for details.
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