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Buying equipment for the business


Marko797

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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.

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wildrover

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Hi.
"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?"

You don't actually 'claim back', you get a tax allowance for that ammount. So, in your example, of you claimed First Year Allowance, you would get an allowance of £400 in that year, meaning that £400 worth of profits would not be taxed. Then, in subsequent years, 25% of the remaining £400 could be claimed - that is called 'Writing Down allowance' and would ammount to £100 in your example, leaving £300 not claimed, of which 25% could be claimed as Writing Down Allowance in the following year, and so on until you either chuck the laptop out or you have got to pence and can't be bothered.

There is no time limit, and in fact, it can be useful to 'defer' claiming. For instance, if you do not have enough profits, after all expenses, to pay tax (about £5,500 this year for a normal tax payer), then there is no point claiming. You could claim the allowance in subsequent years.

This is all very complex and good that you have an accountant. Maybe also call Customs and Excise in your area to see if they do free tax courses for new start ups. I have used these and they are very good. You can then make sure your accountant is claiming all the right stuff.

Keep all your reciepts as wee eddie says. But don't confuse 'expenses' such as e.g. computer paper, note books, office supplies, etc, with Capital Allowance. Office supplies are running expenses and are claimed in full. Again, your accountant should be able to confirm if something is eligible for capital Allowance or if it is just a business expense.

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wildrover

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BTW

If you are claiming Capital Allowance, you make your claim with the rest of your tax claim, i.e. after the end of the finacial year and before 30 Jan 2009 for online claims for the current tax year - again, please confirm all this with your accountant!!

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Marko797

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for your valued input.

Yes, I keep all receipts both hard and electronic copies, so no worries there. The electronic version goes to acctnt.

Yes, it is very complex, and so recognise the need for, and value of, the acctnt. I'm reasonably intelligent, but must say this tax aspect is something I'm having difficulty with.

Even to read about it is so energy-sapping. I guess I'm just a little frustrated with my inadequacy, but need to get vused to the external trust aspect (acctnt). I'm one of those who likes to get his head around things before being happy about something.

I did know of the free courses too, but delivery timescales have meant I've been unable to attend any just yet.

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Marko797

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I actually got back 50% of the cost of the laptop via the accountants, plus 100% of the cost of the laptop case (£39). Been onto them this afternoon, again.

They couldn't answer me on 50% of the PAYG mobile phone costs, but I can claim top up fees back thru the business, with receipts, which helps.

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wee eddie

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It's just a paper calculation. Your bank Account is still light by however much these items cost you. You do not have the money back.

At the end of the Financial Year, your Accountant will look at your Finances. From your Income/Sales he/she will remove your Cost of Sales(how much it costs to make whatever your selling), your allowable Expenses, Allowances and Depreciation. You pay Tax on anything left.

It's all, for the Self Employed, a paper exercises as it came out of your bank account in the first place. You don't actually get anything back. With Luck and Judgement you will have to pay slightly less Tax, next January.

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Marko797

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yes, true, it is all a paper exercise, & your point noted, thnx. I think it was more a psychological thing edd.

I know I earned the money which went into the business, in order that the business was able to pay me back in the personal account.

If I hadn't recovered it though, I would have paid higher Corporation tax on the profits. As you know expenses are deducted before application of CTax @ 20%.

It's all new, a steep learning curve, and a bit of a riddle at times, but like I said, maybe psychological to a degree, and not wanting to be taxed twice to another. Cheers for the input.

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wildrover

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If you are a sole trader or partnership corporation tax does not apply. But if you are a Ltd company it does.

I don't know anything about corporation tax (and all my comments above apply to sole traders and partnerships - I don't know how Limited companies differ) but I suspect that profits will be taxed no matter where you deposit income recieved through the business.

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Marko797

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limited co, wildrover.

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Forum Editor

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I'm sure your accountant will advise you that you can claim the depreciation on assets against corporation tax.

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Marko797

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that's what I'm hearing, and what's happening, especially wrt the laptop mentioned earlier.

Like I said, steep learning curve, but also fun too.

Thnx for the input.

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