Hire Purchase (HP)
Under HP, you effectively own the aircraft from day one (legal title passes on completion of payments). You can claim capital allowances, and the asset appears on your balance sheet. Monthly payments are fixed, and at the end of the term you own the aircraft outright (or have a nominal option fee to pay).
HP is typically preferred when you want long-term ownership, are claiming capital allowances, or have a straightforward tax position. It is the most common structure for both individual and company turboprop purchases.
Finance Lease
Under finance lease, the finance company retains legal ownership throughout the term. You have use and possession of the aircraft, and the lease liability appears on your balance sheet (under IFRS 16 / FRS 102). At the end of the term, you can typically sell the aircraft as agent for the finance company and retain most of the proceeds.
Finance lease can be more tax-efficient for VAT-registered businesses that need to manage balance sheet ratios, or where capital allowances are less valuable. It is popular with charter operators and holding companies.
Operating Lease
An operating lease is a pure rental arrangement - the aircraft does not appear on your balance sheet (under most accounting standards) and you hand it back at the end. Operating leases for turboprops are less common in the UK private market but do exist for AOC operators with specific fleet management strategies.
Operating leases typically cost more over the term than HP or finance lease, as the lessor bears residual value risk. They can be appropriate where flexibility is the priority.
Which Structure is Right for You?
The right structure depends on your tax position, accounting framework, intended hold period and whether VAT recovery is a factor. We work with your accountant and, where appropriate, specialist aviation tax advisers to identify the optimal structure before approaching lenders.
Worked Example
Why Doulton Bridging Finance?
We are a specialist aircraft finance broker with access to the whole of the UK market - including lenders not available directly to the public. We handle the packaging, lender negotiations and documentation so you can focus on the aircraft. Our service is transparent, our advice is honest, and we flag any complexities upfront.
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