Buying equipment for the business

  Marko797 13:13 07 Feb 2008

I'm unsure on this, hence the query.

If I buy essential equipment for the business in order to perform my 'duties', i.e. laptop, mobile phone, printer etc, am I able to recover the full purchase cost from the business as expenses, or do they become company assets, the value of which then depreciate over a set period?

Or, is it just tax relief on the items that I can recover?

I was hoping to recover the full purchase cost as part of the business set-up and therefore recoup some of my own investment from private sources.

  Chris the Ancient 14:45 07 Feb 2008

...and it has always been acceptable to the tax man.

Items bought for the business are written down as capital expenditure and become 'company assets'. That then depreciates each year (at different rates for different items) and this depreciation is tax deductible. Then, after a time - again dependent on the equipment - that value is written off.

One side-effect is that you can use the company assets for personal use. The slight exception is with a car, in which case you pay a percentage dependent on the amount of private use that the car has.

When you get your next tax return, you will see in the explanatory notes how it works in greater detail - and with worked examples that even a twit like me could follow.



  Marko797 14:52 07 Feb 2008

yes it helped, and confirmed my thoughts.

It transpires that on mobile phones (PAYG) that you can claim top-up costs back if you have receipt, and on computer items, u can claim back consumable costs (print cartridges etc) and also stationery costs (paper etc), again with receipt.

These of course are in addition to travel costs (rail tkts/parking/taxis).

  wee eddie 18:07 07 Feb 2008

Would I be right in thinking that this is your own Business, or are you working for someone else?

All expenses, over and above your Day-to-day living expenses can be claimed. Keep all Invoices and Till Slips. Till Slips without a VAT Number and Product Identification are useless. Until you have seen your Accountant, the easiest way is a Spike, for the Slips, and a 50p Cash Book.

Having said that they can be claimed does not mean that your claim will be acceptable.

Vehicle Tax is a minefield and you should seek professional advice. Basically (very) for a Commercial Vehicle with 1 passenger seat (a Van), most of its costs are charged to the Business before Tax is calculated. Any other vehicle ~ you pay all the Costs and get a small allowance for Business use. I know that all the money comes out of the same pot but the difference can be considerable.

  Marko797 21:01 07 Feb 2008

yes it's my own business, not working for someone else. Must confess to being a little naiive on this, hence the original query. That's what the forum is for to my mind.

I have approached the acctnt and it seems I cannot claim full refund of the items I have purchased - laptop, mobile phone, which is not what I expected. The tax relief however as mentioned earlier in the thread is seemingly all I can claim.

I'm seeking a second opinion from an alternative acctnt as I'm a bit miffed. We're talking c.£1k of my own money.

I'm not concerned with the vehicle aspect, as have been advised the best approach is to bill my company mileage.

Thnx for the input ed.

  wildrover 09:22 08 Feb 2008

As I understand it, capital assetts are now claimed as Capital Allowances. In the first year a capital allowance of 50% of the business use of the assett can be claimed, so if you use your sparkly new laptop for 80% business/20% private, and it cost £1,000, then you can claim capital allowances of 50% of £800 in the first year = £400 allownaces. In subsequent years the percentage drops to 25% of of the unclaimed business portion. If the assett is used solely for business purposes, then you can of course claim for 50% of the whole of the cost in the first year, then 25% of the carried forward cost in following years. It never reaches zero but may get to a point where it is iether discarded or becomes too small to be bothered claiming!

Note also that not all assetts have a first year allownace of 50% so its best to talk to the tax man/woman. As above, vans are tricky. Apparently, if you are a driving school instructor with your own car, the car is a van for tax puproses!!

  Marko797 10:11 08 Feb 2008

thnx for the input very useful.

So if I submit a receipt to acctnts for, say, the laptop, which cost, say £800, then in the 1st yr I can claim back 50% of its purchase cost? That wud be £400. Is there a certain time that this is done within an acctg period?

  wee eddie 10:21 08 Feb 2008

Remember that all this is just manipulating the figures ~ The more you can Claim in expenses the lower your Profit and therefor, the less Tax you will be due.

The amount of money you have in your Bank Account alters by neither "a jot", nor "a tittle"

  Marko797 10:28 08 Feb 2008

it's manipulating figures, ed. However it's all above board and forms part of the attractiveness of setting your own business, to a degree.

I'm still 'learning while earning'. I'm not an acctnt and have avoided financial aspects mostly in the past, but now things are different & it's been a good exercise in financial/taxation understanding.

  wee eddie 10:29 08 Feb 2008

Have you "Taken on" this Accountant.

Take their recommendation on all Record Keeping that you will need to maintain.

During your First year it's quite a good idea to get them to cast an eye over what you are doing every month, or so, for the first 3. Then Quarterly until the end of the year.

Don't be embarrassed about this: 80% (from memory) of all New Starts fail (go bust) in the first 18 months. Over half of them due to inadequate Record Keeping.

  Marko797 10:40 08 Feb 2008

I have 'taken on' the acctnts; they are very important, as you know. Another learning curve.

They manage the financial records and taxation probity aspects. I have detailed records too, and both our sets of information marry-up. There's total openness & transparency, which I think is the way things should be.

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