OCT scanner finance for opticians and optometry practices

An optical practice makes two kinds of sale. Sight tests and clinical services are exempt from VAT, and spectacles, contact lenses and sunglasses are standard-rated. The practice is therefore partly exempt, and the VAT it can reclaim on an instrument depends on how that instrument is used. An OCT used almost entirely for clinical examinations relates mostly to exempt income, so much of its VAT is a real cost. The partial exemption rules set out how the recoverable share is worked out, and your accountant will know the method your practice uses. In practice that pushes many opticians towards a lease, where the VAT is charged on each rental rather than in one sum at the start, although a practice with a high dispensing share may still prefer hire purchase and the capital allowances that come with it. The Annual Investment Allowance usually covers the whole cost of a scanner bought on hire purchase; asset finance and capital allowances explains the mechanics.

Illustration only, with round hypothetical figures. A two-room independent wants to join a locally commissioned glaucoma referral refinement scheme that requires OCT, and already charges for enhanced examinations using a basic fundus camera. It is quoted £50,000 plus VAT for a combined OCT and fundus camera with progression software, and £4,000 for installation, integration with the practice management system and training. The purchase is arranged like this.

• The £50,000 scanner goes on a finance lease over five years, so the practice pays sixty rentals with VAT charged on each one rather than £10,000 of VAT at the outset, most of which it could not have recovered.
• The £4,000 of installation and training is paid from cash, as the practice prefers not to borrow for it.
• The lender's question is whether current profit comfortably covers the rental even if the commissioned scheme takes a year to build up, with the private OCT uptake the practice already achieves treated as the base case.
• Had the practice bought on hire purchase instead, with a £5,000 deposit and £45,000 financed, it would have owned the scanner after the final payment and claimed capital allowances on it, but would have paid most of the £10,000 of VAT as a cost at the start.

Monthly figures depend on the lender, the deposit and the practice's credit position, which is why we show practices more than one offer before they sign the distributor's paperwork.

• The distributor's quote, showing scanner, software, installation and training separately
• The last two years of accounts and recent management figures
• Three to six months of business bank statements
• A schedule of existing finance, including any lease on refraction or pre-screening equipment
• A short note on private OCT uptake, and on any commissioned service the scanner lets the practice join
• For a refurbished or ex-demonstration unit, its age, serial number and software support position

New units carry the longest terms and the fullest warranties. Ex-demonstration and refurbished scanners from the manufacturer or an approved distributor are widely financed, usually over a shorter term, and suit a practice adding OCT for the first time. Lenders are cautious about private sales of older units because the software and detectors date quickly and an unsupported scanner has little resale value. If the practice already owns its refraction kit outright, sale and leaseback can release cash towards the scanner. For imaging across healthcare see medical equipment finance, and for older units used equipment finance.

An OCT earns only if patients take up the enhanced examination and the practice is accepted onto the local scheme, so test both before committing to five years of rentals. Check the software licence and service fees, which continue whether or not the finance does, and whether a lease has a secondary rental period that runs on until you give notice. Make sure the VAT cost is in the comparison between buying and leasing. A practice that stacks several instrument agreements can find lenders offer less when it later wants to buy a second practice; see optometry practice acquisition finance. A new practice should read start-up business loans for how an OCT fits into an opening budget.