The rise in VAT to 20% in
February 2011 presents a possible opportunity for lessors if it
makes outright purchase less attractive.
The shift towards asset
finance is expected to be particularly pronounced in the case of
small and medium size enterprises.
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Bluestone Leasing chairman
Philip Bennett said: “To quote David Cameron, we’re all in this
together, and no business sector will be immune from the effects of
the rise in VAT, including leasing. We can help companies to
mitigate their costs over a period of time.
“The upside for companies
seeking to use our services is that leasing will convert large
capital expenditure into small monthly payments so that a company
has the benefits of profit-making equipment immediately while they
can keep their cash reserves buoyant.”
James Baird, a partner at law
firm HBJ Gateley Wareing, had similar expectations
“If the increase deters
capital expenditure, then if anything, it might increase leasing
opportunities,” Baird said.
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By GlobalData“Pricing for equipment will
obviously increase for the initial outlay, so those investing in
capital products will probably look to leasing as an
alternative.”
Asset finance will be of
particular importance to the SME market.
“As far as businesses are
concerned, VAT registered companies will be able offset the
increase as usual,” Bennett said.
“But the vital small business
sector of the economy which is unable to reclaim VAT on purchases
will be able to use leasing to spread that increase over
time
Others suggested the impact
of a VAT rise to 20% would be minimal.
Siemens Financial Services
(UK) general manager of vendor finance Peter Austin said: “I expect
to see a modest increase in new business levels towards the end of
the fourth quarter. That said, I expect the overall impact to be
relatively light.”
FLA head of asset finance
Julian Rose had greater concerns over whether leasing will be
treated fairly in tax law.
“Whatever the VAT rate, the
FLA’s main concern is to ensure that there is a level playing-field
for asset finance,” Roase said.
“That can get complicated
when agreements are signed before a rate increase but assets are
delivered after – fortunately we’ve been able to agree an approach
with HMRC to deal with this.”
The agreement means that hire purchase arrangements made
before 4 January 2011, which would be subject to an initial VAT
payment, will still use the old rate of 17.5%, even if goods are
delivered after that date.
