How to make the most of budgets utilising flexible finance 

October 5, 2023

Flexible finance offers a transformative solution for both public and private sector businesses looking to find alternative ways to invest in much-needed new plant, equipment, and facilities. 

The current economic challenges have resulted in many businesses being forced to reduce their service provision, with many reluctant to invest in the large amounts of capital required to keep their business functioning at optimum capacity. 

Here, our Finance Director Amanda explains some of the financial benefits that a flexible finance agreement can provide. Amanda has over 12 years of experience working in asset finance, with specific expertise in the funding of modular facilities, healthcare equipment and green technology. During her time at SAF Solutions, Amanda has provided financial expertise for many businesses within both the public and private sectors to create bespoke finance agreements that ensure much-needed investment can be made despite budget restrictions

Flexible finance – Tax advantages  

Within the private sector, VAT can be reclaimed in instances where a flexible finance agreement is being used to fund the procurement of new equipment or technology. 

Simply put, VAT is reclaimable on each repayment made as part of a structured finance agreement. For example, if a business pays £10,000 per month, the 20% VAT charged is reclaimable, allowing the Business to reclaim £2,000 from HMRC. 

Any interest paid as part of a flexible finance agreement is also tax deductible. With Corporation Tax rates now as high as 25%, tax-deductible expenses are more beneficial than ever. 

What are the benefits to the public sector, in particular the NHS? 

It has been argued that within the NHS and public sector in general, there are limited opportunities to operate in a tax-efficient way and as such maximise budget allocations available. 

Managed Service Agreements (MSA), incorporate both hard and soft services such as maintenance, staff and equipment into the hire of a fully compliant healthcare facility and are fully VAT recoverable. 

Through an MSA, the VAT on the periodic repayments can be reclaimed from HMRC which provides an attractive incentive for NHS Trusts looking to upgrade their facilities to include new equipment and ongoing maintenance support.  

Why choose a flexible finance option 

Flexible finance is a relatively unexplored solution which can overcome many challenges faced by finance departments across the UK.  

In times of economic uncertainty, when many businesses are uneasy about investing significant amounts of capital, a flexible finance agreement allows a bespoke solution to be implemented. This allows the cost of the asset to be spread across a structured and affordable repayment plan that can be adapted to work concurrently within the budget and forecasts of each business. 

Alongside the financial and tax benefits a flexible finance agreement brings, it also has the ability to unlock significant other opportunities such as business stability and flexibility.  

Whether public or private sector, finance agreements provide steadiness to cashflows, allowing much-needed capital to be utilised elsewhere. Finance agreements also allow for more accurate budgeting and forecasting and can be as flexible as needed. The opportunity for early repayment, reduction in interest rate exposure and the building of credit ratings are all additional benefits. 

Flexible finance agreements are also wholly scalable. There are no minimum or maximum limits to the value of the assets acquired through these agreements. Here at SAF Solutions, our team have created solutions for healthcare equipment, diagnostics, and beds right up to much higher value assets such as multi-story modular healthcare facilities including fully compliant theatres and wards, and also much needed modular car parks.  

In conclusion, flexible finance solutions can significantly benefit businesses by increasing affordability and providing convenience and ease of access to new assets. Understanding what tax benefits are available as part of the financial agreements is a smart way to manage budgets and ensure they are being fully utilised. 

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