Introducing Bluestone: Leon Spencer

Regional Account Manager, North London

Leon joined the Bluestone Leasing team in 2022 with years of experience in the financial industry in his back pocket, the last 5 of which were focused on commercial finance leasing and insurance.

“I have spent the majority of my career in the commercial finance sector, understanding the pain points of my clients’ businesses. I strongly believe that you can’t position a product or service until you’ve truly understood the company and their directors. By deep diving into the company’s objective, I’ve been able to work with my partners to better position a solution which works; not just for the short term but for medium and long term.

The early days

Leon was born, and spent the first 11 years of his life, in Jamaica.

“My earliest memory is being inside our home in Jamaica during hurricane Gilbert when the roof was about to be blown off our house. When I moved to England it was a real shock to go from running around in the very few clothes in the heat of Jamaica to having to be reminded to take a coat with me when I went to play outside. I spent a lot of my free time playing football and basketball, but I also loved getting lost in maths equations. It felt like an escape.

Leon’s inspirations

There are 2 people Leon admires the most, the first being Marcus Garvey, and the other being his youngest daughter. 

“A lot of people I speak to haven’t heard of Marcus Garvey, but he is a national hero in Jamaica. He represents that one person can make a difference in the world and the importance of sacrifice for the greater good.

“My youngest daughter has such tenacity and confidence and an unwillingness to take no for an answer. I really hope that strength stays with her.

If he could transport himself to any spot in the world, he would find himself meditating on a mountain top, but his ultimate weekend is one spent with his wife and 2 daughters, relaxing, laughing and having adventures. In fact, he and his wife have a pact to complete their first skydive together in the next year.

If you would like Leon to help your business to move forward with a bespoke finance solution, get in touch today with him today. 

leon.spencer@bluestoneleasing.com

What is a VAT Loan? Key Features and Benefits

Paying VAT bills every quarter is a legal obligation, but it can be a financial obstacle for many businesses, especially in the current financial climate. Cashflow issues are a common side effect of each quarterly payment. However, what many do not realise, is that it doesn’t have to be like that. 

Many business owners are taking the sting out of paying VAT bills by taking out a VAT loan to ensure HMRC are paid in full and on time and then repaying the loan in instalments over time. This can help businesses to retain valuable cash, avoid late payment penalties, and establish a healthier cashflow. 

Read on to discover more about VAT loans.  

What is VAT?

VAT stands for Value Added Tax. 

It is added to the price of a product or service at every stage of production, distribution, or sale to the end consumer. If the end consumer is a business that collects and pays VAT to the government on its products or services, it can reclaim the tax paid. If the end consumer is not a business or is not registered for VAT, they cannot reclaim the tax paid.

Many products and services in the UK are liable for VAT – that is, they are not VAT exempt. Goods and services that are not exempt typically accrue VAT at the following rates:

  • Standard rate: 20% (most goods and services).
  • Reduced rate: 5% (some goods and services, such as home energy and children’s car seats).
  • Exempt rate: 0% (includes basic and essential items such as most food and children’s clothes).

VAT registered businesses collect VAT on behalf of HMRC and must pay the collected tax (minus any reclaimed tax), to the government on a regular basis – usually quarterly. Most VAT must be paid one month and seven days after the reporting period, but some types of business will have different payment requirements. 

Businesses must register to pay VAT if: 

  • They expect their VAT taxable turnover to be more than £85,000 in the next 30-day period.
  • They had a VAT taxable turnover of more than £85,000 over the last 12 months.
  • The taxable turnover is on sales of goods and services that would be liable to VAT.

Every VAT registered business receives a unique VAT number which must be shown on invoices and most receipts.

It is important to paying VAT bills on time to significant penalties and surcharges. If a business is struggling to pay their VAT bill, they might consider avoiding late payment penalties and keeping cash in the bank by taking out a VAT loan.

What is a VAT loan?

A VAT loan is a type of commercial loan used to pay the quarterly VAT payment to HMRC. 

If a business is struggling with cashflow when their VAT is due to be paid or they would rather invest their cash into the business (e.g., to buy new assets), they might apply for a VAT loan. The lender pays HMRC the amount owed in full, and the business pays the lender back in instalments over time. Repayments are subject to fixed interest rates (which will vary depending on the business’ circumstances )and typically made on a monthly basis over 3, 6, 9 or 12 months. 

The amount a business can borrow will depend on the unique circumstances of the business and eligibility. In addition to credit checks and a review of the business’s financial situation, other eligibility criteria will usually apply, often including:

  • the business is VAT registered
  • turnover is more than £85,000 ex-VAT
  • UK business
  • usually a limited company, although partnerships and some sole traders may also qualify
  • trading for more than one year.

Why would a business use a loan to pay VAT?

  • A VAT loan ensures that HMRC receive their payment in full and on time, helping your business to avoid late payment penalties. 
  • A VAT loan can prevent you from parting with a large chunk of cash that could be put to better use in your business, i.e., to be invested in growth. 
  • VAT loan repayments can be made on a monthly basis rather than making quarterly VAT payments which can help to maintain a healthy cashflow. 
  • VAT loans do not use existing banking or credit facilities and may be arranged as ‘rolling’ or drawdown borrowing (subject to eligibility). This allows the borrower to use loan funds on a fluctuating basis.

Disadvantages of VAT loans

  • Interest will be applied to a VAT loan, so while the payments will be spread over a longer period of time businesses will pay more overall. 
  • VAT loans cannot be used to pay other tax liabilities such as corporation tax, although it is possible to obtain a loan to cover corporation tax bills. 

Interested in a VAT loan for your business?

We can help businesses like yours to obtain the best funding options and facilities, quickly and efficiently, whilst ensuring their short-term goals and long-term ambitions are considered in their financial strategy. 

If you are interested in spreading the cost of your VAT bill over time to retain capital and enable you to manage your budget more effectively, get in touch with us today.

We will assess your business’ individual circumstances and work with you to decide if a VAT loan or another finance solution would be the right choice.

Complete the form below to send us an enquiry.

Introducing Bluestone: Toni McLeod

Regional Account Manager, North East of England and Scotland 

‘I really enjoy the variety of my job – getting to meet businesses from a variety of different industries and seeing what the right finance solution can help them achieve. I look forward to developing relationships with the organisations in my region, helping them to boost their growth strategy through tailored finance solutions.’

Toni joined the Bluestone Leasing team in 2022 with 8 years of experience in the commercial leasing sector industry behind her. Covering the North East of England and Scotland, Toni helps businesses in her region, in any sector, to grow either by financing their own assets or enabling them to offer finance to their customers. 

Although a comparatively recent addition to the team, Toni has settled in quickly with her positive approach, hardworking attitude and plenty of experience in commercial finance.

The early days

Toni was born in Fife in Scotland, but when she was 7 years old her family moved to Cramlington in the north east of England which is where she has been based ever since. 

‘I was one of five children and spent a lot of my time irritating my siblings, but I also played a lot of sports including athletics, running, and I played on the school netball team. This taught me a lot about teamwork. The person I most admire is my mum – she raised five children and I have no idea how she did it! She always taught me to treat others how I would want to be treated.’

The world of work   

Toni remembers an early ambition of wanting to be a bin collector – ‘It probably had something to do with wanting to help keep things clean and tidy’ – but her first paid job was washing dishes in a local pub at the age of 13. Over time she moved on to waitressing before eventually working behind the bar when she was old enough and then leaving home for university.

‘While at university in Leeds I worked in customer service for Asda, and then after I graduated I went travelling round south east Asia. In fact, if I could be anywhere in the world right now I would be in Thailand – I have some wonderful memories from the time I spent there.’

After university Toni started work in the commercial finance sector; she now has more than 8 years of experience with particular experience in fire and security related assets. 

Bluestone and the future

‘I could tell from my interview with Bluestone that it is an ethical and moral company. From my first conversation with the managers and team members it was clear that ethical practices were not just a slogan, but an intrinsic part of the operation. They strive for excellence and I am proud to be joining the team.’

When it comes to her free time Toni has a young daughter who she loves to spend time with, her pet peeves are whistling and people who are dishonest, and she is surprisingly good at training dogs! 

In terms of making plans for the future, Toni would love to take a road trip through America, if she could change one thing about the world, it would be inequality, and she would like to be remembered as a decent, supportive, positive person who made the most of life. 

If you would like to find out if Toni could help your business to grow through a bespoke asset finance solution, get in touch today: toni.mcleod@bluestoneleasing.com.

What is a Corporation Tax Loan? Key Features and Benefits

What is a Corporation Tax Loan? Key Features and Benefits

Every business has to ensure that they pay their tax bill on time, but often this can arrive at an inconvenient time. Given the current economic climate, many businesses may find that making monthly payments over a fixed term provides them with a vital cash injection, giving them a competitive edge by allowing existing funds to be used elsewhere within your organisation. In some cases, the business may also benefit from interest tax relief on the facility.

Read on to discover more about corporation tax loans.  

What is corporation tax?

In simple terms, corporation tax is a direct tax that businesses must pay as soon as they start making a profit and then on an annual basis thereafter. 

The corporation tax rate is set by the government. In 2022, the main rate on all profits (except ring fence profits which are subject to different rates) are subject to a flat rate of 19%. The amount of Corporation Tax a business is required to pay is calculated as a percentage of that business’ taxable profits. It is not enough to simply look at net profit, there are several tax-adjusted trading profits that must be calculated to pay corporation tax.

All limited companies must pay Corporation Tax annually. Both small and large companies are required to pay a flat rate of 19%, but within the thresholds of company size, a system of ‘marginal reliefs’ exist which can reduce the amount of Corporation Tax your business ends up paying. These include:

  • Creative Industry
  • Research & Development
  • The Patent Box
  • Disincorporation Relief
  • Marginal Relief
  • Terminal, capital, property income losses and trading losses

Visit the government website for the latest corporation tax rates and more guidance on calculating your corporation tax. 

When should corporation tax be paid?

Unlike self assessment tax bills, corporation tax is not due at the same time for all businesses. Corporation tax is both calculated and paid annually around your ‘corporation tax accounting period’, typically around the same time as your business’ financial year. 

For this reason, businesses are not sent bills for corporation but are required to: 

1. Register for corporation tax within 3 months of your business starting to trade (dormant companies are not required to register)

2. Maintain accurate accounting records and prepare a Company Tax Return which will help you work out how much Corporation Tax to pay

3. Pay your Corporation Tax by the deadline (nine months and one day following your accounting period from your previous financial year)

4. File your Company Tax Return before the deadline (12 months after the end of the accounting period covered).

If your period exceeds 12 months for financial statement purposes, two tax returns are required to be submitted.

How is corporation tax paid?

There are several options of methods for payment, but businesses must ensure they allow time for the payment to reach HMRC before the deadline. Options include CHAPS, online banking, telephone banking, direct debit, and BACS. Depending on the method of payment you choose, payments could arrive on the same day as they are sent or could take up to 5 working days. 

What if you can’t afford to pay your corporation tax bill?

Failing to pay your corporation tax bill on time can carry serious penalties. Charges begin from the day your payment is late, and interest accrues over time, putting you in a worse financial situation, so it is essential to meet payment deadlines. Continued late payment of corporation tax can result in HMRC taking further action, in the worst-case petitioning for the compulsory closure of your business.

If you are unable to pay your tax bill or there is a chance that you will need to pay after your deadline, you need to contact HMRC as soon as possible. In some cases, HMRC may be able to offer you a payment plan referred to as a Time To Pay arrangement (TTP). This enables some businesses to pay back the tax they owe in instalments. However, TTP is intended as a one-off payment plan to allow extra support, but continuous late payments are likely to result in HMRC asking you to pay the outstanding amount in full.

In order to be eligible for the TTP payment plan, businesses must: 

  • Have no extra HMRC payment plans set up
  • Have no other tax debts outstanding
  • Owe less than £10,000.

Alternatively, businesses might consider taking out a corporation tax loan. 

Why consider a corporation tax loan? 

Using a commercial loan to pay corporation tax bills to reduce the impact of costly late payment fines can be a cost-effective way to utilise cashflow and resources. A corporation tax loan will incur interest, but it enables the business to spread their bill over 6 to 12 months through fixed monthly or quarterly payments. The loan can be secured or unsecured. 

The most common reasons for using a corporation tax bill include: 

  • Spreading the cost of a tax bill, retaining capital and therefore spending power, which in turn can allow for increased competitiveness, growth and expansion.
  • Maintaining a stable and fluid cash flow so they can take advantage of new opportunities and/or fund unexpected costs or drops in income. 
  • Avoiding the risk of high penalties from HMRC for late or non-payments. 

IMPORTANT: Taking out any commercial loan should be approached with caution as if your business’ finances are not in a healthy condition, there is a risk of getting into more debt.

Interested in a corporation tax loan for your business?

We can help businesses like yours to obtain the best funding options and facilities, quickly and efficiently, whilst ensuring their short-term goals and long-term ambitions are considered in their financial strategy.

If you are interested in spreading the cost of your corporation tax bill over time to retain capital and enable you to manage your budget more effectively, get in touch with us today.

We will assess your business’ individual circumstances and work with you to decide if a corporation tax loan or another finance solution would be the right choice.

Complete the form below to send us an enquiry.

Creative Finance 2: R&D Tax Credits

What could your business do with an extra £57,000?

Before we launch into chapter 2 of our Creative Finance series on the government’s Research & Development (R&D) tax credits scheme and how it could save your business money, we need a disclaimer…

At Bluestone Leasing we try to make our content as interesting and accessible as possible, because we want you to make the best financial decisions for your business. A big part of that is making you aware of how your business could save money through tax relief schemes, but we are the first to admit it’s not always the most thrilling or easy to digest topic. So, while we’ve had a darn good go at explaining R&D tax credits as simply as possible, if you can’t stay awake until end of the article, or you are unsure of whether it is relevant for your business, PLEASE don’t dismiss the topic and make sure you seek advice from a reputable accountant. 

Why are we so keen that you get the right advice on R&D tax credits? Because many businesses do not realise that they can apply, and the average R&D tax credit claim for small businesses in 2018-2019 (according to HMRC’s latest statistics on R&D Tax Credits report dated 30th Sep 2020) was over £57,000.

Can your business afford to let that kind of money slip away?

What are R&D Tax Credits?

Technology and science are moving on rapidly, and in order for companies to stay competitive, they have to keep up. R&D tax credits are a government tax incentive intended to encourage and reward companies that invest time and resources in research and development that could benefit the whole UK economy.

That reward is the R&D tax credits scheme which reduces the amount of corporation tax that a company pays, or acts as a cash payment when companies are making a loss.

Which businesses can apply for R&D tax credits?

Many businesses assume that R&D tax credits their activities would not qualify as research and development, or that only companies working in laboratories or engineering workshops can apply.

In reality, any business that pays corporation tax can apply for R&D tax relief, as long as the research and development they are engaged in is original, unique, and has the potential be a ‘game-changer’ for their industry (not just their company). 

Which projects are eligible for R&D tax credits?

If your company puts resources towards creating a new, improved and original product, service or process (that competitors cannot replicate easily), you could claim tax relief on the money spent in the effort. This might include creating new products, processes, software, services or devices not available elsewhere on the market, or making appreciable improvements to existing products, processes, software, services or devices.

Successful R&D projects may lead to patents, trademarks, or breakthrough discoveries with lasting benefits to the company, but even R&D projects that do not produce results could be eligible for R&D tax credits. 

What expenses would qualify for research and development tax credits?

The expenses your company incurs in trying to overcome challenges and innovate can form the basis of an R&D tax credit claim.

The following cost categories may be included:  

  • Expenditure on staff including gross salaries, employer NIC, bonuses, car allowances, and employer pension contributions.
  • Expenditure on subcontracted R&D activities, e.g., paying a website or software developer, legal fees, branding costs.
  • Expenditure on agency workers.
  • Expenditure on fixed assets, consumables and materials (including light, heat and water).

You can make a claim for R&D relief up to two years after the end of the accounting period it relates to. You’ll need to file an amended corporation tax return and depending on the type of relief you’re claiming, rates may differ.

How much tax could R&D relief save you?

There are two different types of R&D tax relief available depending on the size of your business and if you’ve been subcontracted. 

  • SME Research & Development Tax Relief
  • Research and Development Expenditure Credit (RDEC)

SME Research & Development Tax Relief

The small and medium-sized research and development relief is the most common option for small businesses. You must have less than 500 staff and a turnover of less than £100 million.

This scheme allows you to deduct an extra 130% of qualifying costs from your yearly profits, as well as your normal 100% deduction, totalling 230%. In addition, SMEs that subcontract qualifying R&D activities can claim tax relief on 65% of the payment to the subcontractor.

For example:

Project costAmountAmount eligible for R&D tax relief at 130%
Staff basic salaries£176,672.91£229,674.78
  Staff National Insurance£21,582.97£28,057.86
Subcontractor invoiceTotal = £111,326.70
65% of subcontractor invoice = £75,362.36
£94,071.06

The total amount that is eligible for R&D tax relief is £351,803.70.

Paying 19% corporation tax on that amount results in a cash benefit to the business of £66,842.70.       

There is no minimum claim amount under the R&D Tax Credits SME scheme, and 72% of the claims made in 2018-2019 (according to the latest report) were claims of up to £50,000.

If your company is making a loss, you can claim R&D tax credits worth up to 14.5% of the surrenderable loss.

A note about taxable losses

It’s predicted that only 10% of all companies in the UK in the tax period 2021/22 will be reporting a taxable profit over £250,000.

R&D credits are a primary tax relief and can reduce your company’s Taxable Profits below £0.  creating a taxable loss. The Annual Investment Allowance and Super Deduction, however, are final tax reliefs, and so can only reduce taxable profits to £0. This means that if a taxable loss situation would occur, it would not be tax-effective to utilise a Hire Purchase, loan or to use cash to pay for assets.

Research and Development Expenditure Credit (RDEC)

RDEC is aimed at larger companies, but as a smaller business, you can claim it if you’ve been subcontracted to do R&D work for a large company. As of 1 April 2020, you can claim relief on 13% of qualifying R&D expenditure. In 2018-2019, the average claim by a large company was £332,000.  

To find out if your business could be entitled to R&D relief, your first port of call should be a reputable accountant with the relevant experience. However, it is important that the accountant you choose is covered by indemnity insurance. This insurance will add an additional layer of protection to your claim should your accountant provide inaccurate advice on which activities are eligible for R&D tax relief.

Next time…

In chapter 3 of The Creative Finance Mission series we’ll be covering the topic of saving your business money by switching from petrol and diesel to electric vehicles.

Click here to subscribe to the series and we’ll let you know when it’s been published.

Creative Finance 1: Green Up Your Act with LED Lighting

We won’t insult your intelligence by talking about the impending doom of global warming, pollution, climate change, the destruction of the natural world, or the number of species we are driving into extinction. You’re not here for an environmental lecture, and we’re certainly not qualified to deliver one, so we won’t go there. We’re not even going to mention the fact that we are running out of the fossil fuels that our society has relied on for centuries. Honestly. Not a word.

You’re a busy person and, as much as you want to help the planet, the reason you’re reading this article is to get tips on how to reduce your business’ outgoings. Luckily, this article explains how you can do both.

In partnership with CEMA Lighting, this Creative Finance chapter explores how replacing inefficient lighting on your premises with LEDs could reduce your energy usage at least than 50%, simultaneously saving your business money and reducing your carbon footprint.

Why switch to LED lighting?

LED stands for light emitting diode which is a semiconductor device that generates light when electricity passes through it (thanks to a process called electroluminescence).

That’s as scientific as we’re going to get, but thanks to one of our partners, CEMA Lighting, we can tell you about the practical, financial and environmental benefits of switching to LED lighting.

LED lighting is cheaper to power

LED lighting is significantly more energy-efficient than many traditional lighting systems as it produces more ‘useful lumens’, i.e., less of the energy consumed by the light is wasted through heat dissipation. This makes LED lighting at least 50% cheaper to power, depending on the type of lighting being replaced.

LED lighting is better for the environment

Because LED lighting uses electricity more efficiently, your business’ energy consumption and therefore your impact on the planet should reduce by at least 50%. 

LED lighting lasts longer

After 25,000 hours traditional lighting will be operating at less than 80% of its potential output. An LED lightbulb lasts, on average, for 50,000 hours and, if used efficiently, for as long as 100,000 hours.

LED lighting is low maintenance

In addition, LED lights do not include mercury like fluorescent and mercury vapor lights, so they do not require the same maintenance or management at the end of their life.

LED lighting provides a better quality of light

You can see from CEMA Lighting’s before and after photos just how much improvement can be seen when businesses switch to LED lighting. This delivers improved visibility and colour clarity, safer working conditions for staff and improved security and CCTV footage.

Introducing CEMA Lighting

With the UK government setting a target for carbon neutrality by 2050, CEMA Lighting offer sustainable, cost effective LED lighting solutions for environmentally responsible businesses. Between 2020 and 2021, CEMA saved British companies over 2,000 tonnes of CO2. That is the equivalent to heating the average home in Britain for 1,250 years and the same weight as 350 African elephants.

CEMA Lighting’s Case study of RDC

RDC is an IT disposal and recycling company in Braintree. They were using traditional luminaires that consumed lots of energy.

CEMA Lighting replaced the outdated fittings in RDC’s production area with their exclusive Super Lumen High Bay which delivers an impressive 190 Lumens per Watt efficiency. The LED lighting has an anticipated lifespan of 100,000 hours, consumes 58% less energy and offers a brighter and whiter light, ensuring that the production area was lit to over 300 lux (in line with recommended guidelines).

In the offices, RDC were using panel lights that only converted 70-90 Lumens per Watt. These were replaced with CEMA Lighting’s contemporary Halo panel which uses 75% less energy, has triple the lifespan of the system and provided a modern, sleek and professional design throughout the area.

What was the impact?

  • Annual running costs have been slashed by 59%
  • Annual CO² emissions cut by 299.75 tonnes
  • Light levels on the premises have been improved by 30%

“The benefits from the lighting upgrade have been incredible through improved look and feel to the lighting, reduction in energy usage and a dramatic impact to CO² reduction.”

Cole May, RDC

To read about the many UK businesses that have already benefitted from switching to LED lighting, visit www.cemalighting.co.uk/case-studies.  

How much does LED Lighting cost?

At this point, you’re probably thinking, That all sounds lovely, but how much is LED lighting installation going to cost?, or something to that effect.

The answer to this depends on so many factors such as the square footage of the area you want to light, the lighting being removed, the type of lighting being installed, and the complexity of the job in general, so it’s difficult to estimate a price.

Luckily, CEMA Lighting offer free no-obligation lighting audits to UK businesses. They do this by examining your current lighting system and discussing what requirements you have, as well as considering temperatures or sensitive environments which require food safe or anti-explosive specifications. CEMA Lighting will also conduct a full financial analysis to validate investment with cost efficient changes, which is then displayed in a bespoke cost of ownership outlining savings and return on investment.

Here are just a few of businesses CEMA Lighting have worked with to reduce their annual energy bills. NOTE: These percentages outline the savings focused on commercial lighting installations only.

CompanyReturn on InvestmentAnnual Energy SavingsAnnual CO² Savings
Isuzu1.80 Years79%4.63 Tonnes
JKL Mouldings1.30 Years  66%22.79 Tonnes
Actavo1.86 Years62%7.60 Tonnes
Crittal Windows0.90 Years77%105.88 Tonnes
Donaldson0.82 Years*61%147.32 Tonnes

*In this case CEMA Lighting conducted a grants and funding investigation which covered 19% overall project cost.

Funding Your LED Lighting

Switching to LED lighting in your business could reduce your carbon footprint and save you a significant amount of money on your energy costs, but how will you pay for it?

While some businesses might choose to pay for LED installation by taking cash out of the business, that is not always the most cost-effective route. In fact, an increasing number of businesses are choosing to spread the cost of their LED lighting and other renewable technology over time with a bespoke asset finance solution. Doing so could enable you to:

  • Spread the cost of installation over time
  • Keep cash in your business for other growth projects
  • Manage your budget easily thanks to the fixed repayments
  • Save money on taxes, as leasing costs are 100% deductible.

In fact, in many cases, the money saved by reducing running costs more than covers the monthly finance payment, making the whole project cost positive while simultaneously ‘greening up your act’. The table below illustrates some potential costs vs savings.

Total cost of projectMonthly repayment
(3 year agreement)
Monthly energy savingAnnual energy savingTotal saving per annum
£100,000£3,275£3,470£41,640£2,340
£50,000£1637£1,733£20,796£1,146
£10,000£327.50£347£4,164£234
NOTE: These figures are intended as an illustration, actual costs and savings will vary depending on the project scope and terms of the finance agreement.

Next time…

In chapter 2 of The Creative Finance Mission series we’ll be covering the topic of increasing your business’ income by claiming Research and Development tax reliefs.

Click here to subscribe to the series and we’ll let you know when it’s been published.

Introducing: The Creative Finance Mission

“The ‘bosses’ are panicking. They’re going, ‘Oh, cut back, lose staff. That’s the way forward. That’ll save money.’ Will it? Who’s to say that hiring staff won’t save money in the long run?

“New Girl”, season 1, The Office (UK), BBC Two, 2001.

If you recognise these words, and the noughties TV character who bit his goateed lip as he said them, you are probably cringing a little right now. Sorry.

But, confused and slightly illogical ideas aside, it is also worth remembering that the same man had previously increased profit in his branch by 17% and cut expenditure without losing a single member of staff (neither of which were his proudest moments, by the way). So, inept and fictional as David Brent was, is there something to be said for a more creative approach to business?

We think so, and have put together a brand new series of articles to put our money where our mouth is.

What do all businesses want? More money in, less money out.

It’s a straightforward concept, but easier said than done. Common strategies include increasing prices, losing staff, expanding your product range, working longer hours, switching to cheaper source materials, or simplifying your service, but none are particularly appealing.

Ideally, your goal should be to increase your income and reduce your expenditure without reducing the quality of your service or product, or impacting quality of life for you or your staff. Some might say that it’s not possible, but with some creativity and the right guidance, we know that it is.

Every two weeks we will be releasing a new chapter with tips, ideas, and innovative strategies on how you can be more creative in your approach to business finance. Each chapter will highlight and explain a different financial tactic that could increase the money coming into your business, reduce the money going out, or both.

At Bluestone Leasing we have been helping businesses across all sectors to grow and thrive through commercial finance for over 25 years, including a few economic recessions and a global pandemic, and we have more than enough experience and expertise to share.

But we won’t be the only ones putting our ideas into the “melting pot” (again, sorry), and we aren’t in the business of preaching where we don’t practice. Several of the chapters will be created in collaboration with clients and partners who are living proof that these creative financial tactics can have a significant impact in the real world of business.

If tips and strategies that will increase the money coming into or going out of your business sounds appealing, click here to subscribe to the Creative Finance series and we’ll let you know when a new chapter has been published.

“The growth and stability of UK businesses inevitably leads to a stronger UK economy, and that is what the team at Bluestone Leasing are striving towards. We have so much commercial experience and financial knowledge in the team that could be gold dust in the right hands, and we are excited to share it through our new Creative Finance series.”

Vineesh Madaan, Managing Director, Bluestone Leasing

The Rise, Fall, and Return of the Subscription Model

At 9 months of age I was already toddling. I was taking regular breaks and using plenty of furniture to steady myself, but I was up and mobile. Unfortunately, one of my laps of the lounge culminated in me sitting on top of the VCR. I was sans-nappy, and decided that was the moment to, shall we say, relax. This led to an awkward telephone conversation with a woman at Radio Rentals who laughed – quite mercilessly – at my mum’s reason for needing a replacement.

Why am I telling you this charming family anecdote? While researching this article (that was going to be called, ‘The rise of the subscription model’), I found lots of blogs that suggested the idea of subscribing to a service was an emerging trend. Someone born in the digital age might assume that the subscription model is a relatively new concept made successful by the likes of Netflix, Spotify, Birch Box, or Hello Fresh.

But, because they have gleefully told that story at numerous family gatherings, I knew that my parents were making monthly payments for their VCR and TV back in the 1980s. Sure enough, a little research confirmed that paying a regular fee in return for services or products has been around a lot longer than many people realise.   

The birth of the subscription model

The earliest description of paying for a service in instalments (that I found) dates back to the 1500s when European cartographers were publishing maps of previously undocumented land that was being discovered, occupied, and conquered. The aristocracy and academics were buying these maps, but always in the knowledge that updated editions would be forthcoming as exploration continued. The map publishers asked customers to subscribe to future versions of their maps, and the ongoing payments funded their ongoing explorations and map production.

The most well-known example of an early subscription model is the newspaper and magazine industry which, as far back as the 17th century, was encouraging customers to subscribe to regular publications to cover overheads and delivery costs. Over the years several different types of subscription models have emerged.

Today, for a monthly fee, you can receive a box delivered to your home full of just about any product from socks and make-up to chocolate and your evening meals. Some are mysteries that have been curated especially for you by an ‘expert’, or for a monthly or annual fee you can access exclusive content or events. We can have the latest gym equipment, vehicles, mobile phones, software, and technology, as there are very few items that we need to own to use.

The pursuit of ownership

While paying as we go has been part of our society for so long, we can’t get away from the fact that, in the UK, renting or leasing has been regarded as inferior to ownership. A possible reason for this is that as technology became more affordable, renting/leasing became less common and gradually took on negative connotations; only someone who could not afford to buy something outright would need to spread the cost in that way. Combined with our national perception of property ownership as a symbol of success (not a universal attitude by any stretch), and the concept of renting/leasing became tainted.

However, skip a few frames to today, and our buying habits and attitudes are changing at a faster rate than ever before, more so than many of us realise. We don’t ‘go shopping’ anymore – we ‘are shopping’ at all times. We can make a purchase at any time of day or night, from anywhere in the world with an internet connection. If we cannot afford to pay for it all in one go then and there, we expect to be able to pay in instalments. Maybe we can’t afford £300 or £3,000 today, but £50 or £500 per month for the next 6 months? More than doable.

The rate at which technology moves on, and the fact that we are being marketed to from every direction all day and night, are also major influences on our buying habits. When we buy a product, in a matter of months, a new improved version will be released. We buy products not as long-term investments, but in the knowledge that in a few months or years we will want to upgrade or try something new. There is little point investing in assets that are going to depreciate in value or become obsolete, so paying a large chunk of cash to own something has become less attractive.

The past, present, and future of finance is flexible

It seems that negativity towards leasing in general is fading, but there is a stubborn perception in several industries that suggesting finance to customers will cause offence in some way, i.e., that they will imply they cannot afford to pay in cash. In reality, this is a rather outdated view, as choosing to pay via a subscription model or a finance lease often has nothing to do with affordability.

Customers want convenience and flexibility. They expect to be able to shop and pay in the way that is most convenient to them. They might shop online, on the high street, in the markets, or a combination of all three. They might pay upfront in cash, or they might decide to take out a flexible subscription, or to pay in instalments via a finance deal.  

Service providers that do not recognise the need for greater flexibility are running the risk of lagging behind their competitors. Offering more flexible finance arrangements creates a longer-term relationship with a customer beyond a single transaction, increasing customer lifetime value. This type of arrangement has been working since the cartographers of the 1500s found a way to fund their exploration of the world. It has been enabling individuals, families, and businesses to access the technology they need to thrive, whether that technology is a mobile phone, a VCR or 500 state-of-the-art laptops for their employees.

The subscription model, leasing, and renting technology are not new ideas, and it’s likely that they will continue to benefit both customer and service provider for many years to come.

Click here to read the story of Greg, Techtron IT Solutions and how partnering with a finance provider boosted their business.

What’s The Best Finance Option For Me?

We sat down with Bluestone Leasing’s Managing Director, Vineesh Madaan, to go through all the facts and options when it comes to finance to make sure you can make the right decision when it comes to financing your next project. Here’s all you need to know on Finance Leases, Hire Purchase, Operating Leases, Business Loans & Cash.

Finance Lease: 

How Does Leasing Work?

When businesses want to acquire assets, they have several options, they can pay cash or look to finance these via leasing. Leasing works where the finance company pays the supplier for the equipment and in turn then becomes legal owners of the equipment, they then lease/hire the equipment back to the end user, the payments are charged plus VAT, which can be reclaimed as normal.  

What Are The Benefits of Leasing?

There are several benefits to leasing, naturally a big one is retaining cash, why pay out for something upfront when you can pay over time for it. Another significant advantage are the tax savings, Leasing is highly tax efficient method of acquiring equipment whilst spreading the cost of paying for it. 

What Type of Assets Are Best Leased?

Any assets can be financed but the majority must be tangible, some funders only require a minimum of 50% tangible others need it to be 80% plus. The benefit is that a lot of intangible items can be incorporated into the finance. This form of finance tends to suit assets that depreciate in value so can be refreshed at the end of the finance agreement. 

What rates Am I Likely to Pay when I Lease?

This depends on the credit rating of your organisation along with the amount being financed, the better the credit rating and bigger the lend the better the rate. 

What’s the Tax Treatment of Leasing?

100% of the repayments are allowable against taxable income, for example if your taxable profit is £100,000 and the tax rate is 19% you will pay £19,000 in tax, if you were to make £20,000 in lease payments then you would pay 19% of £80,000 i.e. £15,200 in tax, saving you £3,800 in tax. 

What Are the Negatives of Leasing?

You do not or will never legally own the asset, so if asset ownership is your thing then this will not be the product for you. 

What Happens at the End of Leasing Term?

At the end of the agreement, you must cancel the agreement with the funder once this happens rather than to continue to pay rents you can pay a one-off infinite rental to retain uninterrupted continued use of the asset, allowing you to do what you want with the assets. 

Hire Purchase: 

How Does Hire Purchase Work?

The asset is paid for by the finance company, they will want the VAT to be paid up front on the cost of the equipment, this can be claimed back as normal. The finance company then charge a regular payment to the end user, the last payment has an additional option to purchase fee which transfers legal title to the customer. 

What Are The Benefits of Hire Purchase?

You have the legal right over the asset allowing you to claim capital allowances including any enhanced capital allowances that maybe available. Also subject to you making all the payments you will become the legal owner of the asset. 

What type of assets are best bought with Hire Purchase?

Assets that retain their value are generally financed under this method, because at the end of the finance ownership will be retained. Also should the end user want to utilise enhanced tax allowances then they would use this method. 

What rates Am I Likely to Pay with Hire Purchase?

This depends on the credit rating of your organisation along with the amount being financed, the better the credit rating and bigger the lend the better the rate. 

What’s the Tax Treatment of Hire Purchase?

The asset is classed as owned by the company so the end user will claim capital allowances as it would normally do for any other asset it owns, the end user can also claim the interest paid on the finance against taxable income. 

What Are the Negatives of Hire Purchase?

If you do not have any enhanced capital allowances gaining full tax deduction for the purchase of the asset can take an exceptionally long time, also the VAT needs to be paid upfront so needs to be factored into cash flows. 

What Happens at the End of Payment Term?

Once all the payments are made including the fee then the agreement ends and ownership of the asset is transferred to the end user. 

Operating Lease: 

How Does an Operating Lease Work?

The finance company pays the supplier for the equipment and in turn then becomes legal owners of the equipment, they then lease/hire the equipment back to the end user, the payments are charged plus VAT, which can be reclaimed as normal. 

What Are The Benefits of an Operating Lease?

The best use of this type of finance is for assets that have a residual value and where the asset needs refreshing on a regular basis. As the funder has taken a residual value, payments are lower and the asset is handed back at the end of the finance term and a new assets are financed again and so on. 

What Type of Assets Are Best Bought With an Operating Lease?

They have to have a value so the finance company can recover their residual value with a profit. It works well for IT equipment. 

What Rates Am I Likely to Pay With an Operating Lease?

This depends on the credit rating of your organisation along with the amount being financed, the better the credit rating and bigger the lend the better the rate. 

What’s the Tax Treatment of an Operating Lease?

100% of the repayments are allowable against taxable income, for example if your taxable profit is £100,000 and the tax rate is 19% you will pay £19,000 in tax, if you were to make £20,000 in lease payments then you would pay 19% of £80,000 i.e. £15,200 in tax, saving you £3,800 in tax 

What Are the Negatives of an Operating Lease?

You will never own the asset, whist your payments are lower, you will need to re-invest on a regular basis and if you want to retain the assets the costs would be higher than a standard finance lease. 

What Happens at the End of Payment Term?

The assets are returned to the finance company where fair wear and tear is allowed, if there is any more damage the cost will need to be covered, alternatively the finance company can be paid out of their residual for continued use, this will be an expensive option. 

Business Loan: 

How Does a Business Loan Work?

A loan as it sounds is where a company is financially assessed and if they qualify a funder provides them a loan in return the company make regular repayments to cover the loan and interest. 

What Are The Benefits of a Business Loan?

A loan allows the business to use the funds for anything so does provide greater flexibility. 

What type of assets are best bought with a Business Loan?

Any as the loan is paid to the business for them to use as they wish. 

What rates Am I Likely to Pay with a Business Loan?

This depends on the credit rating of your organisation along with the amount being financed, the better the credit rating and bigger the lend the better the rate. 

What’s the Tax Treatment of a Business Loan?

For the loan itself the interest on the repayments is deductible against taxable income. Should the loan be used to purchase an asset then capital allowances can be claimed as normal. 

What Are the Negatives of a Business Loan?

Loans may require additional security. It can also tie up main bank lines of credit reducing the ability for future growth. 

What happens at the end of payment term?

Once all the repayments are made then the loan just ends. 

Cash: 

What Are The Benefits of using Cash?

Saves paying any interest or taking out any debt. 

What Are the Negatives of using Cash?

Cash is key for any business to survive so retaining cash is key, utilising all your cash when things could be financed is not safeguarding the future of the business. 

Get in touch to speak about the best way to finance your next project.

The Bluestone Approach

At Bluestone Leasing we take pride in our close relationships with you, our partners.

By taking the time to get to know you with face to face meetings and regular industry updates you can be assured that we will work to find the right solution for your client.

When you introduce us to your customers we look to gain a full understanding of their projects and business. This understanding of how your customers businesses are modelled helps us to structure a finance facility that is as tax efficient as possible.

As there are a number of different finance agreements that your customer can choose from it’s not as simple as sending them an email and looking at their website to find the best solution, a face to face meeting allows us to ascertain the information we can not gather without speaking with them.

Our aim at Bluestone Leasing is to deliver the best value for our partners, including:

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If you have any questions or would like to discuss a specific project give our team a call today on 01924 248800.