Leasing equipment for a dental surgery
Fitting out a surgery usually means paying for some expensive equipment.
Many practice owners spread that cost with a lease or a hire purchase agreement. This page explains how the two differ and what to check before signing. It also covers the rules for X-ray units and decontamination equipment.
Leasing and hire purchase are different
With a lease, the practice rents the equipment for a set period and makes regular payments. The leasing company keeps ownership.
With hire purchase, the practice pays a deposit and then fixed payments. At the end, the practice owns the equipment or can buy it with a final payment. The British Business Bank says the main difference between the two is who owns the asset.
Finance lease or operating lease
A finance lease usually runs for most of the equipment's expected life, often three years or more. The leasing company recovers the full cost, plus its charges. The practice does not own the equipment, but it is responsible for maintaining and insuring it. At the end, the practice may pay a small rent to keep using it, or sell or scrap it.
An operating lease covers only part of the equipment's useful life. The leasing company takes it back at the end. It is also responsible for maintenance and insurance. This kind of lease can suit equipment the practice expects to upgrade regularly.
Tax and the accounts
GOV.UK says a business cannot claim capital allowances on plant and machinery it leases. The exceptions are hire purchase and a "long funding lease". Leases of over seven years, and in some cases over five, count as long funding leases.
A finance lease appears on the practice's balance sheet as a capital item. An operating lease does not. An accountant can say how each choice works for your practice.
X-ray units
An X-ray unit used by a dentist is a radiation generator under the Ionising Radiation Regulations 2017. Work with one needs a registration from the Health and Safety Executive (HSE). Check that your registration is in place before a new unit goes into use.
Decontamination equipment
In England, the guidance on decontamination in dental practices is HTM 01-05. It says decontamination equipment should be fit for purpose and validated. A Competent Person (Decontamination) or a service engineer should commission, maintain and periodically test it. The practice should keep maintenance records and monitor the equipment working correctly.
So, for a leased washer-disinfector or steriliser, agree in writing who arranges that servicing and testing, and who holds the records. Wales has its own version of the guidance, WHTM 01-05.
Questions to ask before you sign
- Who owns the equipment during the agreement, and at the end?
- What are the choices when the term ends?
- Who maintains, services and insures the equipment?
- Who arranges validation and testing, and who keeps the records?
- How will the agreement be treated for tax?
The British Business Bank suggests getting independent, specialist advice before applying for any finance.