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VAT Deferments

Machine Finance With VAT Deferment

Need help with a VAT Deferment for your machine finance?  For most machine finance agreements Premier Business Finance recommend Hire Purchase.  This is often the best way for manufacturers to finance new and used machines.  However there is the impact on cash flow since the whole of the VAT on the whole cost of the machine has to be paid before or at delivery of the machine.  This is in addition to any other deposit required by the underwriter.  Therefore with a machine costing £50,000.00 + VAT, if a 10% + VAT deposit is required then £5,000.00 (10%) + £10,000.00 (20%) = £15,000.00 will be required in total.

The £10,000.00 VAT can be reclaimed when you complete your next VAT return but this may not be for a period of up to 3 months.  Therefore you have a period of up to 3 months where you have to carry the cost of the £10,000.00 VAT which can be difficult for many manufacturers.  There are a couple of ways this problem can be overcome.

a)  Your Machine Supplier

Covering the cost of VAT is a common problem and many machine suppliers will help by taking a post dated cheque for the VAT if it means it they obtain an order.  Naturally it is best to raise the subject prior to placing the order at a time when you have a stronger negotiating position.

b)  Machine Finance VAT Deferment Facility

Machine finance lenders are often prepared to approve a VAT Deferment for up to 3 months.  This means that instead of paying the VAT at or before delivery of the machine, it is deferred for up to 3 months.  Therefore you do not have to pay the VAT until after you have already claimed it back using your VAT return.  The VAT is then usually collected by direct debit together with a normal monthly instalment.

Please contact us anytime for free help, advice and quotations.