Just completing my first tax return as a self employed bookkeeper. All pretty straight forward EXCEPT I brought into my business a fairly new laptop and printer. I have my put my accounts on Quick Books. I am aware that, as computer was not brand new, I have a written down allowance of 20% = £60 less 10% for personal use = £54.00.
My first question: Is the written down allowance the same as depreciation on my accounts? If not how do I manage it in my accounts?
The second and most important question: On my tax return the page relating to capital allowances has Annual Investment Allowance. Is that where I put my £54? It does deduct this amount from my profits so makes sense.
Its so frustrating as all the HMRC help sheets arent clear about small things like this, they just deal with examples of brand new machinery of £100k+
As far as I'm aware Asinfish and from what I have done so far with regards to tax returns and AIA the allowance you are claiming does not count. The way I understand it is the depreciation you are claiming is NOT what hmrc want. When you buy something into the business asset wise then you use the FULL cost of the asset for the AIA. Only when it goes over the AIA limit is when you bring in the writing down costs. HMRC don't care about the yearly depreciation and want the full cost of the asset written off in the first year.
The deprecation you gain in the year is charged to the balance sheet as depreciation in the usuall way. It just affects the bottom part of your profit and loss statement for the year. I would show you an example of what I did but don't have acces to any of my files at the moment. :/
Given the amounts we are dealing with it's probably better just to expense the laptop. I know that for fixed assets capital allowances are the correct way to do it, but when the values get so small it's just not worth it. Think of bins and staplers, they are fixed assets but would you bother depreciating them and claiming capital allowances. I think the same can be said with your laptop here.
Kris
Thank you everyone for your reply, but I don't think I worded my question very well. I am completing my SA tax return online at HMRC. Where do I put the costs of bringing my computer into my business and how much can I put down? The computer and printer was 1 year old Cost £500. So the "cost" for my business would be approx £300. I acknowledge the reply that suggests putting it through as an expense, but would probably need to replace my laptop next year as its having issues so want to deal with it correctly from the start.
I have been led to believe I cannot put the full cost down as it wasn't new from the start of my self employment.
-- Edited by asinfish on Sunday 16th of September 2012 09:16:48 AM
the value of the asset introduced to the business should be its fair value at the time of the transfer.
The definition of fair value is defined as :
The value for which an asset could be exchanged or liability settled between knowledgeable, willing parties in an arms length transaction.
so basically, if you met someone who wanted to buy a second hand computer how much do you think that they would have paid you for it? (fair price, not fire sale).
To say that you are selling a computer is a bit like saying that you are selling a one year old car, how much is it worth.
What is the current second hand Market Value of your computer?
Note that we are talking about a sale to a willing, unrelated person, not a fire sale so the valuation I would assume for your computer would be between 40-60% of the new price exclusing the VAT element.
Lets say that it cost £500, then that's approximately £417 excl. VAT new (VAT must not be accounted for as part of the transfer value) so I would expect the introductory price for a computer to the business to be between £170 and £250 dependant on the make and model of computer. (probably less for something like an Advent and more for something like a Dell XPS).
If you feel that you can justify the computer only having lost £117 over the year (VAT exclusive figure down to £300) then by all means put down £300 but whenever you use any figures alway image justifying the figure during an inspection.
If you can prove an active market such as Ebay or Amazon resellers then print the evidence (will need more than one) and use that as your basis.
Inspectors tend to be much more forgiving of slightly out figures the larger the figures concerned are so putting through £350 for a transfer in of a computer is likely to go unnoticed where it is an immaterial asset of a business than one that is one of the larger assets as I assume to be the case here.
Hope that this helps,
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi. Depreciation starts out similar but might differ by being apportioned to the days/weeks when you buy or dispose of an asset. Depreciation isn't adjusted for private use % so your c/f amounts soon diverge from Capital Allowances.
Shaun has given a thorough analysis of valuation and you have done well so far. You've found you should be using WDA not AIA and you're aware of personal use. By the way, I therefore take it you have added back depreciation in the earlier self-employment pages.
asinfish wrote:
Its so frustrating as all the HMRC help sheets arent clear about small things like this, they just deal with examples of brand new machinery of £100k+
Yes indeed! What is the Office Of Tax Simplification doing about this? WDA rates had stayed 25% for decades and First Year and 10% allowances should have been dumped when AIA came in, if not by now. This sort of tinkering brings taxation into disrepute with most folk - for whom £100k machinery is pie in the sky. People ought to be able to complete self employment forms and I should be out of a job. HMRC don't have staff available to police these things, and that last fact alone makes for bad law.
Hi Tim. Thank you for your help. Whilst the valuation advice is valid from shaunit is not my area of query! I have the paperwork to justify the value of laptop/ high spec printer and external hard drive! I hadn't done my depreciation journal so thank you for reminding me. Sorry to go over this.... But is it the WDA figure that goes on the AIA box on the tax return? The help sheets are so "unhelpful". I'm nearly at the point of "renting" my laptop to myself for my business use! Is that an option?
The General Exclusion No. 5, right near the bottom of the above link will tell you whether to claim AIA or WDA. I've avoided box numbers because you're using the Revenue online software and I don't think that uses the numbering on the paper forms.
Immediately below that you might like to click on 'Manual Contents' for a little history of capital allowances.
I've never done what Phil has recommended above, but he might follow up this thread and I'm always eager to read his advice. It might be to do with the size of the business, if you feel like divulging turnover etc.
HMRC are happy to accept a 'capitalisation threshold'. i.e. only capitalise expenditure over £500. depending on the size of hte client (materiality concept). As long as you are consistent and can explain your justification this is fine.
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I am working part time, self employed because I was made redundant and have just completed 10 months to 31.03.2012! So T/O less that £15k!
re General Exclusion 5 - yes seems apparent that its not AIA as was brought into business after being purchased for other reasons. Typically, the only section on the SA tax return, is Capital Allowances, which only mentions AIA - there is no box for WDA! Is it one and the same? Do I put my £54 in, which reduces my "huge" profit by £54 before clculating my tax?
My first two posts today were on the basis that you had changed the value from £54 to £300. Are the laptop and computer two different machines or have I completely misread your posts.
Thanks all The HMRC "help" pages are the most complicated and mostly irrelevent to tiny businesses. It probably only applies to large companies that can afford accountants anyway! I have scoured the internet for resources to help very small uncomplicated businesses with very simple accounts and I dont think they exists. HMRC want people to get it right but wthout any help from HMRC!
HMRC want people to get it right but wthout any help from HMRC!
And if you get it wrong they fine you... Thinking embedded incentive to bury any helpful documentation there.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I seem to think the biggest capital value that I've treated as an expense is about £280. I only deal with micro-businesses. If I had been pulled up about it in an investigation, I wouldn't have spent time arguing the toss. However, I seem to think I've seen a de-minimis level of £250 and Phil has seen one for £500.
I'm surprised the online software doesn't have a box for WDA. Wait a minute. This is HMRC. Don't be afraid to use the only box available but make it clear in the 'Additional Information', (white space as they say) what you have done and why.
