Generally, businesses will pick one of three options:
Also known as hire purchase, payments are made over a fixed period, and at the end the asset becomes yours. VAT-registered businesses can claim back the VAT on the asset up-front, there is a capital allowance on the reducing balance and interest payments can be offset against profit as part of a 100 per cent tax allowance over the term of the contract.
Similar to lease purchase, except you do not own the asset at the end of the contract, although you may wish to buy the assets at some point. Payments can be offset against tax and VAT can be reclaimed.
Using an asset that remains the property of the finance company, which is also responsible for its maintenance and upgrade – can be a more affordable option to finance lease for this reason, and attractive because there is no big initial outlay.
Yes, but a limited amount. You can claim up to £200,000 per year annual investment allowance (see our FAQs on financial aspects of an office fit out). However, if you lease the project, the repayments are 100% tax allowable, which can mean it works out cheaper than paying cash.
Frequently asked questions on what needs to be thought about before embarking on a fit out project