The legal ownership of assets acquired via hire purchase (HP) passes to the buyer on signing the contract. In contrast, a leasing agreement is where a company borrows an asset owned by someone else. This document covers these in detail, along with their tax treatment; difference between an operating and a finance lease; long funding leases; car leasing pre/ post-April 2009 and changes post April 2013.
Points discussed within this guidance note:
> Assets bought on hire purchase
This note details information in relation to hire purchase finance and hire purchase accounting, including when legal ownership of the asset passes to the company and how the company will pay for the asset. It also details monthly HP repayments and how to ascertain whether interest and a capital repayment element are allowable deductions or deductible expenses.
> Leasing costs
This note considers the tax treatment of finance leases and the accounting for leasing, which differs depending on whether it is an operating lease or a finance lease.
> Long funding leases
> Car leasing ― lease starts before 1 April 2009
> Car leasing ― lease starts on or after 1 April 2009
> Changes post 1 April 2013
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