« What is tax-exempt leasing? | Main | Deferred Again »

Jan 4
A Level Pitch
The equipment leasing industry in the US has endured ongoing attacks from the tax authorities over the past several years (see my post of December 29,2005). After seeing a preview of certain provisions of Finance Act 2006, it now looks like the UK leasing industry may find itself in similar circumstances. One of the provisions of the proposed budget gives the right to claim the capital allowances on leased equipment (the UK version of tax depreciation) to the lessee, instead of the lessor, who is the legal owner. These rules will apply to ‘long-funding leases’ of plant and machinery, which is a very broad and far-reaching category of equipment (see www.nortonrose.com/html_pubs/view.asp?id=5473 for additional detail).
 
As a bit of background, efficient use of tax benefits is one of the more than 35 reasons why a company may choose to finance its equipment with leasing (some of which may be found at http://www.chooseleasing.org/). For instance, a company with a net operating loss (NOL) cannot currently utilize the tax depreciation associated with buying the equipment. If a lessor buys, and then leases the equipment to the company, however, the lessee receives the benefit of the depreciation in the form of a lower lease payment. The lease, with its sharing of tax benefits, represents a tax efficient form of financing
 
If the Finance Act 2006 proposals are enacted, however, lessees with NOLs will no longer be able take advantage of lessors’ tax appetites. In addition to effectively turning past practice on its head, this change will increase the cost of financing equipment for lessees in the UK. Another consequence of this change will be a decrease in investment in new equipment by those lessees with NOLs. Lastly, and of equal importance, is the effect on lessors, who will see a decline in their business, creating a further drag on the economy.
 
While diminution of the tax benefits available to leasing is nothing new to UK lessors, might I suggest that my fellow lessors in the UK take a hint from your cousins here in the States – protect your turf! The position of the US Equipment Leasing Association (ELA) always has been that the tax environment and conditions must reflect a level playing field, which, for those with a soccer mindset, equates to a level pitch. That is to say, there should not be any distinction between types of owners when allocating tax benefits.
 
The ELA has consistently and diligently protected this concept through lobbying efforts, public relation campaigns, and joint programs with other industries. A level pitch is essential to long-term economic growth and consistent investment decisions. Make certain you continue to play on one!

related entries


1 Comments/Trackbacks




Thank you, Mirun. I hope this is true.

submit a trackback

TrackBack URL for this entry:

post a comment

Name, Email Address, and URL are not required fields.





Comment Preview

« What is tax-exempt leasing? | Main | Deferred Again »

Advertisement

recent comments

sponsored ads



subscribe


Prefer Email?
Subscribe below-

Enter your Email:


Powered by FeedBlitz What's this?

Current News

Support This Blog

business social media

Use these fast growing business social media sites to promote your business, feature your products, spotlight your business leaders, create links, and drive traffic back to your company site, all for free!

BIZZlogos - Add your logo - free link to your site
BIZZphotos - Add photos of your products and people
BIZZprofiles - Submit your profile and build your online visibility
BIZZspotlight - Spotlight your business with free links
BIZZvideos - Videos about businesses, products and business people.
BIZZbites - "Digg" for Business - Submit your articles and posts

know more media network

View Network Map

Network Feed List (OPML)

Know More Media Network
Feed


we support unitus

PRWeb

Influencer



LeasingNotes is a member of the Know More Media network of business related blogs.

Here are some current headlines from some of our business publications:

ProductivityGoal

CallCenterScript

AdHurl

TheBizofKnowledge

LandingTheDeal

CustomersAreAlways

HealthCareVox

BrainBasedBusiness

TheInsurancePolicy

MarketingBlurb