What is a finance lease?

A finance lease is a type of commercial lease in which the legal owner of the asset — in this case, a tractor — rents the asset to the user of the tractor for an agreed-upon period. When a lessee enters into this agreement, they have full operating control of the asset. They will have responsibility and assume the risks and rewards that come with owning the asset. For accounting purposes, the lease gives the lessee the same economic characteristics as if they had full ownership of the tractor. The lessee will record the asset as a fixed asset on their balance sheet. In this situation, the lessee will record the interest of the lease payment as an expense. The lesser charges rent in exchange for lending the asset. The lessor retains ownership of the asset but the lessee gains exclusive use of the asset (providing they abide by the terms of the lease). The lessee is obliged to make rental payments that cover the original cost of the asset. There is an obligation to pay all of the fixed rental amounts, sometimes including a percentage of the purchase price of the vehicle at the end of the contract.

What is an operating lease?

An operating lease in contrast is the simplest form of equipment leasing, where the customer doesn't take on the risks and rewards that come with owning the asset (such as maintenance costs). An operating lease or contract hire is a way of renting an asset for your business over a short or medium time frame without taking on any risk. With an operating lease, you can get a tractor hire over a fixed term, with lower monthly payments and without the commitment of ownership.

News

HMRC's new VAT deferral payment scheme now open for registrations

25 Feb 2021

HMRC have opened its new online VAT Deferral New Payment Scheme for registration as of 23rd February 2021.

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This means that over half a million businesses that deferred VAT payments between March and June 2020 are eligible to join the scheme to pay it in smaller monthly instalments.These businesses will now be given the option to pay their deferred VAT in equal consecutive monthly instalments from March 2021.

To take advantage of the scheme, businesses will need to opt-in to the VAT Deferral New Payment Scheme online, where they’ll be able to spread their repayments between two and 11 equal monthly interest free payments. This can be done until the service closes on 21 June 2021. Alternatively, eligible businesses can also ring the HMRC Coronavirus Helpline on 0800 024 1222 to join the scheme until 30 June 2021.

Payments can start from March and the earlier businesses opt-in the more monthly instalments are available to them to help spread the cost and provide additional support.

This new VAT deferral payment scheme is part of the government’s wider business support packages worth more than £280bn.

Not eligible for the new HMRC scheme but still need help financing your VAT bill? Find out how Funding Options can help your business here.

Stuart Lawson

Chief Commercial Officer

Stuart is Chief Commercial Officer at Funding Options where he plays a key role in driving the growth of the business and its relationships with more than 120 partners. A finance industry veteran, he has a strong background in alternative finance, corporate and commercial banking, as well as global transaction banking.

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Disclaimer: Funding Options helps UK firms access business finance, working directly with businesses and their trusted advisors. We are a credit broker and do not provide loans ourselves. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. We are also able to make insurance introductions. Funding Options will receive a commission or finder’s fee for effecting such finance and insurance introductions.

*Eligibility criteria apply - see Tide website for full details.

Funding Options Ltd is incorporated and registered in England and Wales with company number 07739337 and registered office at 4th Floor The Featherstone Building, 66 City Road, London, EC1Y 2AL.

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HMRC's new VAT deferral payment scheme now open for registrations

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