Tax Benefits of Leasing a Commercial Coffee Machine
Leasing equipment generally carries certain tax benefits. Our coffee machines are available to buy or lease, but most businesses find leasing their coffee machine far more cost-effective – even if you can afford to buy your machine outright.
When you lease a commercial coffee machine from Nationwide, you pay a set monthly sum for its use, with the option to own that machine at the end of the lease for a final payment of one month’s rent. Alternatively, you can end your contract or begin a new lease on a newer machine. HMRC treats equipment leasing differently to capital purchases when it comes to tax. Rentals and leases are a 100% tax-allowable business expense, so you can offset them against your pre-tax profit for as long as you lease the equipment. This reduces your tax bill. If you’re registered for VAT, you can also reclaim the VAT, of course. Capital assets – which you’ve bought outright – depreciate in value, and depreciation isn’t an allowable expense for tax purposes. As with all tax matters, we strongly recommend talking to your financial adviser or business accountant for a full breakdown of the tax advantages of leasing business equipment.
Buying vs leasing a coffee machine – why hiring your coffee machine saves money
While most commercial catering equipment should last beyond the typical three-year lease period, the reality is that most coffee-making equipment should be replaced every three to five years on average. Buying outright often leads to higher ongoing maintenance costs if you keep your machine for longer, and frequent large capital outlays if you replace your coffee machine every three to five years. Buying coffee machines via a business loan or agreed overdraft eats into your available credit, costs more in interest, and still means you’ll be looking at maintenance costs and a higher capital cost when the time comes to replace.
Reducing capital expenditure means more lines of credit preserved for more important use, and retaining working capital for other ongoing costs, like supplies, business rates, commercial rent and salaries. Rental agreements, on the other hand, don’t require the large up-front outlay and become a predictable monthly cost for which you can readily budget.
Leasing your coffee machine usually means you can also afford a more versatile and more powerful machine than if you were to purchase outright. And it’s the coffee you make that earns you your income, not the fact that you own a machine, which depreciates in value over time.
For these reasons alone, we think that leasing makes most sense.
A quick leasing benefits summary
- No large capital outlay in one lump sum – usually just one month’s lease payment equivalent serves as your deposit
- You can usually afford a better machine for the same equivalent cost when leasing
- At the end of the lease, you can either return the machine, continue the lease, or change for a newer and better coffee machine; if you decide you want to own the machine, buying it at the end of the lease can be as little as one more month’s payment
- You preserve lines of credit and/or cash in the bank to use as working capital
- Leasing coffee machines means a predictable, fixed monthly sum you can easily budget for – and with interest rates fixed at the outset, there are no nasty surprises
- Coffee machine rental costs are a 100% tax-allowable business expense.
For specific benefits for your business, please talk to your accountant; to find out the most affordable and cost-effective purchase price or rental cost of commercial coffee machines in the UK, give our helpful team a call on Freefone 0800 840 9023 or email email@example.com today.
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