Investing in any type of equipment especially a photocopier is a big decision. It will take out a huge amount from any business owner’s capital. It is especially hard to decide if you are a small business owner. Most owners don’t have a choice because they need the equipment in order to function daily so it is a good idea to minimise the overall cost as much as possible and that includes maximizing your tax benefits. Try to absorb the cost of the equipment at the end of the financial year through your tax deductions. Your accountant is the best person to advise you on the best way to balance the cost distribution of liability versus your current assets that will allow you to enjoy a good cash flow.
Business owners have 3 options to acquire equipment – buy, rent or lease. You can buy outright, lease from a dealer or rent the equipment for a short time. We will discuss these 3 options in this article.
When you purchase a photocopier, you get a brand new machine. It will come with a manufacturer’s warranty and service and maintenance agreements. You will have peace of mind that your machine will be working perfectly for many years. You will also be assured that it will be fixed immediately should anything go wrong.
For taxation, your equipment immediately counts toward tax equity purposes because you are the owner. You can deduct 40% of the cost in taxes. There is also an additional 25% deduction per year of the remaining balance until the total cost is written off. After that, your deductions end that is why buying brand new is not popular among businesses.
The disadvantage of this option is you get a huge chunk out of your capital to buy the copier. If you find your business suddenly growing or reducing work, you get stuck with a machine that may either be too much or not at the level of functionality you need it to be.
This is the most popular option among businesses especially small and up and coming ones. This does not involve a huge sum of money outright.
Although you don’t have the large financial burden at the beginning, if you compute your costs in the long run, it turns out to be more expensive than buying outright. But, there are still many benefits from leasing a photocopier or multi-function printer.
With a lease contract, you pay a relatively smaller monthly fee. It is more manageable compared to purchasing. This helps you manage your cash flow better.
With this type of agreement, you can also upgrade or downgrade your machine model at the end of the lease period. You don’t have to worry about the money you paid for the old model and you also don’t have to worry about getting rid of it. The leasing company will simply get the machine from you.
Leasing gives you the most attractive tax deduction. Every expense you pay for your lease can be written off on your taxes as a business expense. That includes maintenance and service contracts. Simply put, you get a tax deduction on every single payment for the entire length of your lease agreement.
Leasing is expensive in the long run but it can substantially lower your annual tax expense.
Renting is advisable in situations where you suddenly find yourself in the middle of growing or restructuring your business. It is also useful for short term projects.
Although this has the cheapest monthly fees, this is also the most expensive option among the three when you look at it in the long run.
As far as tax deductions are concerned, you can offset your costs with your monthly overhead but the high cost of renting still overshadows any potential tax benefits.
As a rule of thumb, if you have a large volume of copies to make every day, just buy your own device. If you need a multifunction printer that costs over £1,000 leasing is your best bet with regard to maximising tax deductions and managing your cash flow.
Before signing anything, read the contract first. Ask questions on items that you don’t understand or are not clearly explained. Discuss taxing matters with your accountant too to be sure of your decision. Make sure that there are no hidden charges.