As many businesses are looking at going back to work in the office again, there are now the new considerations of what the office looks like in the “new normal”.
If we look at CCF as an example, we are typical of many businesses in our position.
Currently, we have desks in different positions to how the office was designed, with makeshift screens and social distancing measures in place. That’s just for the staff who remained in the office. There are also the workstations belonging to the home workers who have been working there for a long time and plan on staying there part if not full time. Then there are the ones in between who have had a mixture of home and workdays.
What this all leads to is an inefficient use of office space. For businesses such as mine who have basic computer and telephone systems in place, we end up with desks sat empty but for a computer with no operator in the building and clients not being able to call them directly, or other desks only being used once or twice a week.
Investment is therefore going to be required to bring ours and many similar offices into an efficient space to work.
One of the questions that will be presented is whether to buy or lease the equipment and furthermore if buying, whether to buy outright or to use finance.
The first consideration is cash-flow. Can the organisation afford to buy the item outright. This is often the least expensive option.
Next is the useful life of the equipment and whether the business wants the risk of owning it and having the hassle and expense of replacing it in 3 – 5 years or so. This might steer them towards rental rather than buying on hire purchase.
Next up is the deal on offer. When comparing two like for like items but with one on lease or another on a purchase plan, which one represents better value for money or a better deal?
Finally, comes the tax consideration. In any case, the costs of office equipment and telephone systems will be allowable expenses for tax purposes, however, tax relief doesn’t want to be the steering force. What is a consideration however is the difference between a lease and an outright purchase or purchase on HP.
When acquiring equipment on a lease, (subject to the 90% test) the rentals will be offset against profit as and when the payments are made, so if it is a three-year lease, there will be tax relief over three years.
When buying the equipment outright on a cash purchase or HP, the full purchase price can be used to reduce taxable profit in the accounting period which it is acquired in. So that’s all the tax relief in one go in year one. This can make a massive difference depending on the value of the goods purchased.
Financing equipment can feel like a minefield but it can be straightforward once you understand the thought process behind it.
CCF can help with these considerations as we understand the differing priorities of businesses depending on their circumstances. If you wish to discuss your next asset purchase, call CCF on 01423 567499.