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Q. What is Racking Rental?

Q. Who Rents?

Q. How does Rental work?

Q. Why not buy racking outright?

Q. What about borrowing the money?

Q. Are payments affected by inflation?

Q. What is the tax situation?

Q. What if we decide to replace the equipment?

Q. Will the rental amount change?

Q. Why should I pay by direct debit?

Q. What about insuring the equipment?

Q. Can charges for maintenance be included in the rentals?

Renting is a well-established, tax efficient method of financing a wide variety of capital equipment. Practically every sector of the British economy takes advantage of renting: Organisations which rent can be found throughout industry and commerce, in business large and small, commercial and non-commercial. A recent survey shows that around 8 out of 10 accountancy practices rent equipment and some 85% of the Times Top 100 UK Companies. A rental agreement is a contract between a Rental company and a customer, giving the customer use of the equipment on payment and rentals over a period. When you lease equipment you make a series of regular (usually 3 monthly) payments instead of a large capital outlay. Payments are spread throughout the useful life of the equipment and are made out of your revenue budget. The cash flow and tax relief benefits of rental provide a very strong case against cash purchase. If you buy racking outright the capital invested becomes, in effect, tied up in a depreciating asset. Leasing on the other hand, allows you to save resources for other purposes such as new business opportunities, responding to unexpected problems or simply investing in product development or marketing. Using an existing credit line will prevent you from been able to use it in the future for unexpected needs or for short-term funds. Moreover, the business that borrows to finance equipment is still vulnerable to changes in interest rates. Banks may also want to limit the amount financed and impose a fixed or floating charge as security. Renting, however, is not effected by fluctuations in interest rates and allows you to plan your budgets accordingly. Financing equipment through a loan is unlikely to offer you the same flexibility to change the equipment by upgrading or adding other items. Payments made throughout the life of a rental agreement are not affected by inflation. The real cost of renting will reduce over time as the value of money depreciates. Businesses choosing to rent racking can claim full tax deductibility on rental payments under the tax rules, which apply to business profits. So long as the term of the lease matches normal depreciation rates for the equipment, lease payments are generally fully allowable against tax profits. For example: If your company is paying Corporation Tax at 33% then £33 in every £100 of lease payment can be reclaimed. Please note that this information is given without liability on the part of Rent-A-Rack .you may wish to seek guidance from your professional advisers on this matter to ensure all the relevant issues have been taken into account.

A tax efficient solution - testimonial:
"Leasing is incredibly tax efficient - we can claim tax relief on our monthly payments for the whole term of the agreement."

"Tax efficiency was very much part of our start-up strategy and it kicked in right away. Because of the tax relief we get, and no excessive up-front expenditure, getting the best equipment is very affordable. We decided that buying outright made no sense whatsoever, because racking equipment is a depreciating asset with very little re-sale value. Under the terms of our agreement, we have the flexibility to upgrade all equipment, simply by extending the term of the lease." A leasing facility allows businesses to keep up with the changes in technology. Your original installation can be altered, either during or at the end of the lease, to accommodate unforeseen changes in your business needs. Don't forget that you can add additional items to the lease during the period. Only if the government chooses to increase the rate of Corporation Tax or makes amendments to V.A.T. Changes to any maintenance facility, however, will depend upon the individual arrangement you have with your supplier. The convenience of making lease payments by direct debit means you avoid the need to organise payment for the equipment on a quarterly invoice basis thus minimising administrative costs. You need to arrange insurance for the lease equipment at your own expense. The maintenance element of your agreement is also tax deductible as a business expense in the same manner as the lease rental.

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