Machinery finance: fund production, plant and agricultural machines

Usually, yes. HMRC treats a standard hire purchase agreement as a sale of the machine at the start, so VAT on the full cash price is charged when the machine is delivered, not spread across the instalments. A VAT registered business then reclaims it on its VAT return in the normal way. On a finance lease or contract hire the position is different, because VAT is added to each rental instead. Smart Funding Solutions, a whole-of-market commercial finance broker, compares both structures so the VAT bill does not catch your cash flow out in the month the machine arrives.

How the VAT works on each type of agreement

• Hire purchase. VAT on the whole price falls due at the outset, and the interest is treated as a separate supply of credit, which is exempt from VAT.
• Finance lease. The lender keeps ownership and charges VAT on every rental, so there is no large VAT payment at the start.
• Operating lease or contract hire. VAT is also charged on each rental, and the machine goes back at the end of the term.
• Agreements with a large final payment. Where the final payment is set at or above the expected market value, HMRC can treat the deal as leasing from the start, so check the structure with your accountant.

HMRC sets out the timing in its VAT guidance on hire purchase and conditional sales.

Can the VAT on a machine be funded as well?

Often it can. Some asset finance lenders defer the VAT for a short period so that you pay it after reclaiming it on your next return, and others add a short VAT loan alongside the main agreement. Either way the deposit is a separate question, and lenders set it by the age of the machine, how easily it resells and the strength of your accounts, rather than by a fixed rule. Read how hire purchase and a finance lease compare, or see VAT loans if a larger VAT bill is the pressure. To see which panel lenders may fund your machine before anyone searches your credit file, start with Instant Quotes.

Yes, although fewer lenders take on imported machinery and they ask more questions first. The lender has to be confident the machine exists, arrives in working order and has a resale market in the UK, so well known makes and models with a UK service network are easier to place than one-off builds. We present the supplier, the shipping terms and the installation plan to lenders on our panel that fund imported plant and production equipment.

What lenders check on an imported machine

• The supplier. How long it has traded, whether it has sold into the UK before, and a formal quote or pro forma invoice.
• Shipping and title. The Incoterms on the order, who insures the machine in transit, and when ownership passes.
• Import costs. Customs duty, freight and import VAT, which may sit outside the amount financed.
• Installation. Who commissions the machine and signs it off, because some lenders release the final payment only once it is working.

Will a lender pay a deposit before the machine is delivered?

Some will, but it is the hardest part of an import to fund. Many overseas makers ask for a deposit with the order and the balance before shipping, while asset finance lenders prefer to pay once the machine is on site. Where a lender will not pay early, the gap can be bridged with trade finance or a short working capital loan that is repaid when the asset finance completes. On the VAT side, a VAT registered business can usually use postponed VAT accounting to declare and recover import VAT on the same return rather than paying it at the border. Compare plant and machinery finance with used equipment finance, then check the numbers for your machine on Instant Quotes, which does not touch your credit file.

Before you borrow, estimate what the machine will add each month: extra output you can sell, labour or outsourcing costs saved, less scrap or downtime. Compare that figure with the monthly finance payment, running costs and insurance. If the machine's contribution comfortably covers the payment from the month it is installed, lenders are more likely to see the case, and you are less likely to strain cash flow while production ramps up. Allow for delivery, installation and training time before it starts earning.

Used machines are financed every day, as long as they have a reliable second-hand market. What changes is the term: lenders set a maximum age at the end of the agreement, so an older machine gets a shorter term and a higher monthly payment.

• Age limits on our panel: Aldermore takes machine tools up to 12 years old at the end of the term; Cambridge & Counties Bank takes excavators up to 15 years (checked October 2026).
• Valuation: for higher-value or specialist machines a lender may want an independent valuation or an inspection.
• Dealer or private sale: a dealer invoice is simplest; a private or auction purchase needs proof of title and a check for outstanding finance.
• Lifting plant: for used telehandlers, cranes and access platforms, ask for the current thorough examination report (HSE: thorough examination of lifting equipment).

More on used equipment finance.

Construction and agricultural plant is among the easiest machinery to fund, because excavators, telehandlers, dumpers and tractors hold their value and sell readily. See plant finance, excavator finance, telehandler finance and crane finance.

Farms can often match payments to when income arrives; see agricultural machinery finance. Oxbury Bank, a farm lender on our panel, offers hire purchase on vehicles, plant and green assets over terms of up to 7 years.

If you bought machines outright, asset refinance or a sale and hire purchase back can release cash from them while you keep using them.

• How much: lenders on our panel advance between 50% and 100% of a machine's valuation, most often 80% to 90%, and some lend up to 100% of the invoice price if you bought it in the last 90 days (checked October 2026).
• What they take: most refinance only hard assets such as plant, machinery and vehicles.
• Example: £80,000 released over three years at an assumed 10% a year costs £2,581.37 a month, £92,929.50 in all. The rate is an assumption for the illustration, not a quote; fees and VAT are left out, and the rate you are offered depends on the lender and your circumstances.

See asset refinance and sale and leaseback.

Other pages that may fit what you are buying.

• Machines and plant: Plant finance, Laser cutting machine finance, Forklift finance, Cherry picker finance, CNC machine finance.
• Ways to pay: Business hire purchase, Finance lease, Asset refinance, Used equipment finance.
• Sectors: Manufacturing finance, Construction finance, Agricultural machinery finance.
• Tools and guides: Asset finance calculator, Asset finance and capital allowances, Asset finance.