Hi Rob,

welcome to the forum.

Limited companies can lease in their own right so no problem with your client taking a lease through the company. (although with new companies the finance provider will want personal rather than company guarantee's).

There are tax implications dependent upon whether the type of lease taken out is an operating or a finance lease. The former being no more than renting the equipment where the latter is to all intent and purposes financing of an asset which would need to be recognised and depreciated as such.

The documentation required is all of the standard information that passes between the leasing company and the lessor which must clearly show the type of lease.

Note that something that professes to be an operating lease but is quite obviously not (for example where the benefits of ownership are largely consumed during the period of the lease) mean that it will be recognised as a finance lease (and the asset recognised in the books) no matter how the documentation describes the transaction.

This actually verges on tax advice which we are not really covered to supply so my advice would be to consult with your clients accountant to determine the best course of action for then.

good luck and wishing you a happy and prosperous new year,

Shaun.

P.S. I really should check my spelling and grammar before posting!

-- Edited by Shamus on Tuesday 28th of December 2010 10:43:23 AM

Hi Rob,

we're getting into FRS15 Tangible Fixed Assets territory here.

It's quite common practice on incorporation to pass assets already owned into the company. These would generally be measured at fair value (the amount that the asset could be sold for in an arms length transaction) at the point of transfer which, in the case of a van would be easy enough to measure as there are numerous second hand guides. (don't forget that you would need to keep a copy of one of these for the month of the transfer to show where the transfer figure came from).

Where assets are transferred then this makes part of the owners capital invested in the venture. Hypothetically your client could then take this money from the company although in the early days of trading that isn't normal practice as the company is unlikely to have the funds to make such payments.

Leasing is properly the territory of lease and finance companies. Its not as straight forwards as many of the people that your client is working with probably think that it is and proper financial advice should be sought before contemplating this move.

I've certainly not encountered this situation myself but I suspect that Bill (Wella) or Rob (Robh) may have done so expect a follow up reply when they log in.

On a separate note, as your client has just incorporated it may be time to sit him down and tell him what he has taken on as many clients at this stage still think in sole trader terms.

Your client has a fiduciary duty of care over a separate legal entity. This is similar to the duty that a parent has for its child. The company is not a personal piggy bank. If they act as though it is then it is not being run as a limited company and the veil of incorporation may be lifted and the owner will become personally liable for the companies debts.

The worst advice that any client ever gets is that offered on the building site or down the pub... Then again, we should be all for it as sorting out the misconceptions and misinformation pays our mortgages.

As a plus note, if your client is getting bad advice from work colleagues then there may be opportunities there to gain new clients!

Have fun and talk soon,

Shaun.

Agree with what Shaun has said and i have nothing much to add unless we we start discussing the tax aspects later on. What I do want to know (just out of curiosity) is why the guys down the pub (and your client) want to go down the leasing route.

Just being nosy really.