I am brand new to this forum so I hope this question makes sense and hope you can help.
The Small Tools tax allowance enabled landlords and businesses to deduct the cost of replacement tools in computing profits, providing immediate 100% relief for the costs. In its application to landlords, the allowance was intended to be used only for small items, such as crockery and utensils.
My landlord client had been claiming the cost of small tools under the old rules above, for small tools purchased specifically and solely for maintenance jobs at his rented property where he carries out all the maintenance himself, so there is no paid contractor who brings their own tools for the jobs.
The Small Tools allowance has been replaced by a new relief for replacement of domestic items, allowing landlords to claim relief for replacement appliances. "However, the abolition of the replacement tools relief will mean that landlords will find it difficult to obtain relief for any tools, implements and utensils that do not fall within the definition of domestic items and which consequently will fall outside the ambit of the new relief."
Does anyone have advice on how I account for the landlord's "Small Tools" in this situation, if he can still claim the cost of tools?
So hows about an intro before we start. We always ask newbies!
Usual stuff - what prof body do you belong to, do you work for yourself or in a practice/ firm, are you a bookkeeper or accountant, what qualifications, how long in role, where up to in your studies-what exams passed/with what body/in midst of doing, where based, what you did before this role? That sort of thing. Helps get to know you but also how best to pitch answers.
Unsure where your quote is from - might be worth stating your source.
What items are you specifically looking at now? Status of the business might be useful.
What happened in year one after the tax law change?
-- Edited by Cheshire on Friday 27th of April 2018 07:11:22 PM
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Apologies for launching straight in with a question, this is about me...
I work for the Director of a small limited company in north west London which produces trade show exhibition stands and graphics, who is also a HMO landlord, I am the bookkeeper for both businesses.
I have no qualifications I have been trained on the job and have been doing the bookkeeping for the last 2 years using SAGE 50. The end of year accounts are produced by his accountant.
After leaving school I was a computer programmer for a couple of large corporations for 20 years, tiring of that i started marketing and bookkeeping for a couple of small independant music festivals, lasting 5 years.
To expand on the situation now, "small tools" has been claimed by the limited company for its business, not the rental property. It is only in the last year that change in legislation has required the rental property to be licenced as an HMO by the local Council. There has been substantial work upgrading the property for heightened health and safety, much of the work has been carried out by the landlord himsself to the required standards and has been fully certificated. However, the landlord has had to buy specific tools for these jobs and solely for that purpose.
I was asking for any guidance how to claim against tax for these actual small tools, as seems unclear from the Taxinsider information. Is there a distinction between new tools purchased and replacement tools?
no sorry not at all, to clarify, he put small tools used in his Limited Company business through his limited company accounts, correctly.
He owns 1 property which he rents out rooms in, it is not a limited company, it is under self assessment.
He has not claimed landlord small tools at all before. The many small tools costs in the last year to him as a landlord were for reasons already outlined.
He is my boyfriend, I am performing admin, he checks the entries I make.
I'm sorry i will complete the profile, I am new to forums.
If you are offering bookkeeping services then as Joanne says you will need ML cover as a must and are strongly advised to have PII in place.
Just to clarify, the Ltd Co and the rental are run as 2 separate businesses with separate accounts.
You say that substantial work has been carried out on the property and that this has been carried out by the Landlord in which case in my opinion all the costs involved in this would be allowable expenditure including materials and any tools needed to carry out the work, whether this is indeed classed as Revenue or Capital would depend on what works were carried out.
Why did you not ask the accountant who produces the end of year accounts about this?
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
The answers are too vague to give specific advice. (Besides, the business owner is not paying me!)
But advice I can give
1) you say you are a bookkeeper with no experience. You are asking to be sued when you get it wrong!
2) A bookkeeper only goes to Trial Balance - ie does not get involved in tax situations.
3) Accountants will deal with the tax.
Agree with Doug - you need to leave it up to him to deal with at the relevant year/tax year end for both businesses. Park the items in sage anywhere and leave a note for him to sort at the year end. Or better still , in case you forget thenput them in a nominal code called 'Accountant to deal with'. Where you put them in sage does not necessarily mean they will or will not be tax deductable. Besides it really doesnt matter for the purposes of what you are doing.
4) Do not rely on google searches for your information.
If you use something like the tax website you mention then ONLY rely on the paid for/subscription method information gleaned AND only then if it relates to your specific circumstances.
The pages you are relying on are not kept up to date so how on earth are you going to be able to rely on them/know that there have not been changes?
5) Do not rely on information gleaned via the extremely dummed down Gov.uk. It contains inaccuracies.
6) Do not rely on information from HMRC. This is GUIDANCE only and often does not actually reflect the law, so also contains inaccuracies. HMRC will fine and penalise you/business owner if you do it wrong (despite their info being incorrect!)
7) The ONLY thing that you can rely on is the legislation itself - so that is what you need to be looking at. You can get a copy of the legislation via google - but ensure you also read case law surrounding it if you are intent on relying on it. I suggest you are not as you will be wanting the Accountant to take on this responsibility.
Or of course as Doug rightly suggests - the business owner should take the advice of his Accountant. Assuming that Accountant is suitably qualified in tax related as well as Accountancy related matters. If not find another one.
NB - as Ive alluded to - Accountancy treatment doesnt necessarily follow tax treatment.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
What of the domestic appliances in the subject heading bar?
Relying on google for tax advise. A dangerous game. But why would you need to know, unless you are doing the self assessment etc.
Frankie went from it being her client to being her boyfriend I think she's just doing the books for the Ltd Co and SA property rental but maybe she can clarify?
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Thanks Doug, I appreciate your opinion that's helpful, also Joanne thanks all noted.
To clarify, I am just working for the 1 person only who has 2 separate businesses he does his own self-assessment.
Hi Casu -
There was maybe too much information in the topic title, I did refer to the domestic appliances in my original post text... i just wanted the title to catch the eye of anyone with experience of the same situation.
I wasn't relying on google, which is why I was asking you forum members for advice, which I got, thanks.
I wonder why he does his own self assessment when he has an Accountant, who could save him some money.
That said, Im afraid we cannot help you further on this site / future questions - it is not for business owners to get free advice.
I would recommend that you do a course so that you can support him further. Start with say the AAT, then look at tax specific qualifications eg ATT, CTA.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I wonder why he does his own self assessment when he has an Accountant, who could save him some money.
Especially with him renting out a property, as the rules have changed considerably.
That said, I had a client where I did both his Ltd Co and his self assessment (1 property rental) and he moved to a Chartered Accountant* but his daughter did the SA!!
* I gained him as a new business and he has done very well, and was growing to a point where an accountant was more beneficial to him.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
I am a Landlord and have been for a few years now. The rules are changing all the time and I have to look up things and even ask advice from an accountant colleague when I am unsure of the treatment of something. It is quite a specialist area and advise should be sought!
Ask his accountant for some help and then like Joanne says set up a separate nominal code on Sage and dump it in there. That is if he pays for it with the LTD co bank account. If not and he pays for it personally because it is not linked to his Ltd co, stick it on a spread sheet and send it to the accountant. Really he should consider getting his accountant to do his SA as well as his Co accounts. It could end up a costly mistake if it's wrong.
Yes, and now the new HMO Licensing legislation has brought more complixity too.
He uses 2 separate SAGE companies one for his ltd co (a one-man small business) and one for his property account, they are kept completely separate and dealt with separately.
His accountant was dealing with the ltd co only, so I take all your points thanks.
His accountant was dealing with the ltd co only, so I take all your points thanks.
Frankie
But why?
Why would the Accountant do one and not the other?
Amanda and John are both bookkeeping and /or Accountancy professionals, with appropriate qualifications/experience.
Tax law is complex.
Are you saying he/you have the necessary skills? I would think not, but hey - when the inspectors come knocking they could well have a field day.
It all just seems a bit pointless when he supposedly has someone on board! But a bit cheeky not to pay one, but then come on looking for free advice from a bunch of others. Only difference is, presumably you know the skill set of the Accountant, but you have no idea what this bunch of strangers on this website have in terms of knowledge, so we could be telling a complete load of porkies.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I think she's just doing the books for the Ltd Co and SA property rental but maybe she can clarify?
