Asset finance leasing - XL Business finance
XL Business Finance Blog » Blog Archive » Financing Imported Machinery Continued

Financing Imported Machinery Continued

OK , so we have discussed the options for making payment to the supplier but what is the best way to pay for the machinery and what are the best finance options?

The majority of foreign suppliers will either invoice in euros or US dollars. The finance company will book the foreign currency to provide an exact exchange rate and use the sterling equivalent on your documentation.

At this point it is worth mentioning that finance companies are not importers and it is either the supplier, their UK agent or the customer to make sure the necessary arrangements in terms of VAT numbers, import duties etc are made with the appropriate import authorities.

Although the  foreign suppliers invoice will have NO VAT as soon as a UK finance company raises either a hire purchase or finance lease document VAT becomes payable. If hire purchase is required all the VAT becomes payable in advance to the finance company. AS with any finance lease facility Vat is only paid on the deposit amount and the remainder of the VAT is paid on the monthly repayments.

However with the correct documentation and structure it is possible to provide a Vat neutral hire purchase deal so no physical payment is actually made. This only works where foreign suppliers and is structured as follows.

Instead of invoicing the finance company, the foreign supplier raises an invoice direct to the customer in euros or whatever the foreign currency maybe. The customer raises an invoice to the finance company for the sterling equivalent and because this is a UK invoice VAT must be applied. The customer will request that the proceeds of the invoice will be paid direct to the  supplier.

The finance company prepare their hire purchase documents and the Vat on the HP doc cancels out the Vat on the customers invoice. By doing the deal in this way the customer in affect becomes the UK agent and is normal practice for a standard agency agreement to entered into before the transaction commences.

Tags: ,

Comments are closed.


 
 
 

XL Business Finance Ltd is a privately owned and independent business financing company with established links to many of the UK's leading finance houses. XL Business Finance provides a viable alternative to high street banks that lack the flexibility and imagination to provide a solution to most business users requirements. XL Business Finance can provide a full range of business financing solutions and we ensure a high level of customer service and pride ourselves on quick decisions. Our independent status will ensure any offer of funding and asset finance leasing is best suited to our customer’s needs.

XL Business Finance, Eaton Place Business Centre, 114 Washway Road, Sale, Cheshire M33 7RF UK.

 

Manchester, Liverpool, Leeds, Preston, Sheffield, Stoke, Merseyside, Lancashire, Cheshire, Staffordshire