Hire Purchase provides the benefits of ownership without incurring the full capital outlay at the outset. Payments are agreed in advance and are fixed for the life of the agreement.
The full VAT, or the VAT difference if a part exchange is included is normally payable on signing the agreement but can be reclaimed in the normal way since the finance agreement is acceptable as a VAT invoice.
Title passes at the end of the agreement when the payments are complete and the option to purchase is exercised. However, because the intention to purchase exists from the outset, capital tax allowances and the available relief can be claimed from the point the equipment is brought into use.
The machine must be comprehensively insured by the purchaser.