Capital allowances help
Discussion
Looking for some advice on capital allowances - potentially a relatively complex scenario!
All relating to how/what HMRC would deem the asset as (at my count, there's four possible options that could all at face value potentially apply - with very different outcomes).
Then, especially if it's at the worst end of the spectrum, what actions my business might be able to take to mitigate this from a cash flow perspective (again, there's options from the business perspective).
Anyone got a contact they'd recommend?
All relating to how/what HMRC would deem the asset as (at my count, there's four possible options that could all at face value potentially apply - with very different outcomes).
Then, especially if it's at the worst end of the spectrum, what actions my business might be able to take to mitigate this from a cash flow perspective (again, there's options from the business perspective).
Anyone got a contact they'd recommend?
Sway said:
Looking for some advice on capital allowances - potentially a relatively complex scenario!
All relating to how/what HMRC would deem the asset as (at my count, there's four possible options that could all at face value potentially apply - with very different outcomes).
Then, especially if it's at the worst end of the spectrum, what actions my business might be able to take to mitigate this from a cash flow perspective (again, there's options from the business perspective).
Anyone got a contact they'd recommend?
Your first (and probably only) stop should be your accountant. They will be best placed to understand your context and advise accordingly.All relating to how/what HMRC would deem the asset as (at my count, there's four possible options that could all at face value potentially apply - with very different outcomes).
Then, especially if it's at the worst end of the spectrum, what actions my business might be able to take to mitigate this from a cash flow perspective (again, there's options from the business perspective).
Anyone got a contact they'd recommend?
If you haven't got one, go hire one!
StevieBee said:
Sway said:
Looking for some advice on capital allowances - potentially a relatively complex scenario!
All relating to how/what HMRC would deem the asset as (at my count, there's four possible options that could all at face value potentially apply - with very different outcomes).
Then, especially if it's at the worst end of the spectrum, what actions my business might be able to take to mitigate this from a cash flow perspective (again, there's options from the business perspective).
Anyone got a contact they'd recommend?
Your first (and probably only) stop should be your accountant. They will be best placed to understand your context and advise accordingly.All relating to how/what HMRC would deem the asset as (at my count, there's four possible options that could all at face value potentially apply - with very different outcomes).
Then, especially if it's at the worst end of the spectrum, what actions my business might be able to take to mitigate this from a cash flow perspective (again, there's options from the business perspective).
Anyone got a contact they'd recommend?
If you haven't got one, go hire one!
I think R&D allowances could apply, if not then there's a potential to look at separation into two assets under different treatment. Or, there's no option but to accept massively reduced annual allowance for the asset - which seriously hampers our attempts at getting me out of Corp life, and running a small business that let's me enjoy life with Mrs Sway whilst we somewhat can (she has a degenerative genetic condition, which is worsening faster than we hoped/was thought likely)...
So there's quite a lot riding on getting this right, with as little risk as possible!
Myriad seem to specialise in doing R&D capital allowance applications, with a 'no success, no fee' basis - unsure of what sort of cost that might attract though (we really are bootstrapping this, so budget is tight - but equally if it helps us get to where we want to be...).
OK then... A little more clarity and detail on the four assets you mention might help extract some insight here.
But you mention R&D and Myriad so I assume we're looking at some form of R&D Tax Credit, Tax Relief or Grant. If so, and in theory, if you have received or planning on receiving any of these, none should have any impact on your tax obligations. This is because for Tax Credits and Tax Relief, you are affectively receiving some of the money back that you have previously paid to HMRC. Tax Relief is a pre-agreed incentive that reduces your tax liability.
If you're talking about the assets as being potentially eligible for any of these, then that is indeed something for the likes of Myriad to determine. What they will assess is the level of originality and the investment you've made (and need to make) in developing them.
But be very cautious. HMRC operate a pay-now : verify later approach. I've written many times here how we got caught out on this some years back, receiving £26k back from HMRC only for them to come back 18 months later and deny the claim, asking for the money back, by which time, it had been spent. Myriad will defend any such challenge and reimburse their fees but only after you've repaid HMRC.
Hopefully that's of help but if I've misinterpreted the issue, let us have a little more detail.
But you mention R&D and Myriad so I assume we're looking at some form of R&D Tax Credit, Tax Relief or Grant. If so, and in theory, if you have received or planning on receiving any of these, none should have any impact on your tax obligations. This is because for Tax Credits and Tax Relief, you are affectively receiving some of the money back that you have previously paid to HMRC. Tax Relief is a pre-agreed incentive that reduces your tax liability.
If you're talking about the assets as being potentially eligible for any of these, then that is indeed something for the likes of Myriad to determine. What they will assess is the level of originality and the investment you've made (and need to make) in developing them.
But be very cautious. HMRC operate a pay-now : verify later approach. I've written many times here how we got caught out on this some years back, receiving £26k back from HMRC only for them to come back 18 months later and deny the claim, asking for the money back, by which time, it had been spent. Myriad will defend any such challenge and reimburse their fees but only after you've repaid HMRC.
Hopefully that's of help but if I've misinterpreted the issue, let us have a little more detail.
Sorry chaps, recognise I'm being frustratingly vague!
We've come up with a design for a very high spec motorhome that's unlike anything else on the market (in the UK/Europe at least, there's a couple of firms doing something broadly similar in the US). It's based on a Merc Sprinter Chassis Cab with a few modifications and a box on the back with some very expensive kit inside.
Plan is to build the prototype, which will be tested extensively prior to launch - and then ideally become a demonstrator, but using a second hand Sprinter as they're buttons (and new ones very, very much aren't!).
Want to launch next October (as mentioned, there's some time pressure due to Mrs Sway). We've very modest goals, and I'm consulting outside IR35 under the same ltd to bootstrap it without debt.
This all depends on getting 100% capital allowance relief in year one on the spend. However, accountant is incredibly cautious, and feels the best approach is to have it as a company car asset... Capital allowances being completely out of my wheelhouse, it was at this point I learnt of 6% CA relief on company cars!
So. There's a big conundrum. Without 100% relief (at the very least on the expensive contents of the box) then I simply can't do it in anything like the time frame I need to achieve.
Trying to educate myself, it seems there's two potential options - firstly, treat the habitation box and van as two separate assets under usual reliefs. It would seem there's arguments for and against HMRC accepting this separation.
Or (and this is the solution I think is entirely appropriate and justifiable) put the whole thing through under RDA CA relief, as my reading is that this also includes company cars where you can demonstrate that it's appropriate R&D for the company developing it's product.
Apologies for the prior vagueness. I'm still being as vague as possible, as I'm very wary of someone poaching the idea and being first to market. In the world of campers/motorhomes especially for the smaller players and at this level of end product, it's never good to come across as a copycat!
Ltd is registered as 'manufacturer of other parts and accessories for motor vehicles' (sales will be based on customer providing me a new Sprinter chassis cab for me to build and integrate the habitation box onto).
At face value, does my logic seem sound to achieve the 100% capital allowance relief in year one?
We've come up with a design for a very high spec motorhome that's unlike anything else on the market (in the UK/Europe at least, there's a couple of firms doing something broadly similar in the US). It's based on a Merc Sprinter Chassis Cab with a few modifications and a box on the back with some very expensive kit inside.
Plan is to build the prototype, which will be tested extensively prior to launch - and then ideally become a demonstrator, but using a second hand Sprinter as they're buttons (and new ones very, very much aren't!).
Want to launch next October (as mentioned, there's some time pressure due to Mrs Sway). We've very modest goals, and I'm consulting outside IR35 under the same ltd to bootstrap it without debt.
This all depends on getting 100% capital allowance relief in year one on the spend. However, accountant is incredibly cautious, and feels the best approach is to have it as a company car asset... Capital allowances being completely out of my wheelhouse, it was at this point I learnt of 6% CA relief on company cars!
So. There's a big conundrum. Without 100% relief (at the very least on the expensive contents of the box) then I simply can't do it in anything like the time frame I need to achieve.
Trying to educate myself, it seems there's two potential options - firstly, treat the habitation box and van as two separate assets under usual reliefs. It would seem there's arguments for and against HMRC accepting this separation.
Or (and this is the solution I think is entirely appropriate and justifiable) put the whole thing through under RDA CA relief, as my reading is that this also includes company cars where you can demonstrate that it's appropriate R&D for the company developing it's product.
Apologies for the prior vagueness. I'm still being as vague as possible, as I'm very wary of someone poaching the idea and being first to market. In the world of campers/motorhomes especially for the smaller players and at this level of end product, it's never good to come across as a copycat!
Ltd is registered as 'manufacturer of other parts and accessories for motor vehicles' (sales will be based on customer providing me a new Sprinter chassis cab for me to build and integrate the habitation box onto).
At face value, does my logic seem sound to achieve the 100% capital allowance relief in year one?
Capital Allowances and R&D expenditure relief are slightly different.
If you are making a prototype for possible future production, I would expect that this is more in the line of R&D rather than just a Capital Allowance matter.
HOWEVER, because R&D relief has been historically very generous, it has also been massively abused by some businesses with actual frauds having been perpetrated in some cases. As a result, HMRC has cracked down big time on R&D claims and if you want to go down this route, I would highly recommend using an accounting firm or tax consultants who are experts in this specific area. I have heard recently that 40% or so of most tax disputes at the moment are connected with what HMRC thinks are excessive R&D claims.
Proceed with caution is all I would say.
If you are making a prototype for possible future production, I would expect that this is more in the line of R&D rather than just a Capital Allowance matter.
HOWEVER, because R&D relief has been historically very generous, it has also been massively abused by some businesses with actual frauds having been perpetrated in some cases. As a result, HMRC has cracked down big time on R&D claims and if you want to go down this route, I would highly recommend using an accounting firm or tax consultants who are experts in this specific area. I have heard recently that 40% or so of most tax disputes at the moment are connected with what HMRC thinks are excessive R&D claims.
Proceed with caution is all I would say.
Thanks Eric. Recognise I'm likely mixing terms - crucial bit is the outcome is the same from my cash flow and Corp tax perspective!
Appreciate the heads up, whilst I think (based on spending the early hours of this morning reading everything I could on HMRC) I'm fully justified, the warning is welcome.
Guess I'm chatting to someone like Myriad then.
Appreciate the heads up, whilst I think (based on spending the early hours of this morning reading everything I could on HMRC) I'm fully justified, the warning is welcome.
Guess I'm chatting to someone like Myriad then.
You might find this link interesting reading -
https://www.gov.uk/government/publications/hmrcs-a...
https://www.gov.uk/government/publications/hmrcs-a...
jeremyc said:
Also be aware that relying on HMRC paying your R&D tax relief to sustain cashflow is high risk: they have in the past been very late in their payments.
My understanding is that there's two schemes - tax relief and RDA?I'm reading this, which implies that you're accounting as a standard capital allowance and therefore accounting for the costs under capital allowances prior to profits being calculated for Corp Tax, therefore you're not having to claim retrospectively?
https://www.gov.uk/hmrc-internal-manuals/capital-a...
The qualifying criteria seems to be the tricky bit: https://www.gov.uk/hmrc-internal-manuals/corporate...
I'd strongly argue that the 'technology advancement' is developing the smallest motorhome that includes all the systems and features that we're delivering. No one else is doing anything like it (certainly not for the size of vehicle that we'll be producing - everyone else doing anything similar the vehicle is significantly bigger/heavier).
If I can meet those criteria, then it appears that from an accounting perspective, then all costs are incurred and accounted for as qualifying costs to have capital allowance taken prior to calculating Corp tax due?
And yes, point taken on risk. Intending on being very risk averse - however it's a balance between being too cautious and that slowing everything down significantly, and watching Mrs Sway slowly decline to the point that by the time we do launch (and hopefully succeed, with no debt and very modest aims) it's too late to use the extra time afforded by releasing myself from the desk I'm chained at to actually be able to enjoy that time with her...
Claim throughCapital Allowances if possible - as they can be up to 100% - and are less contentious than R&D claims.
However, some expenditure incurred on R&D would never qualify for Capital Allowances so the only way to get the R&D claim would be to go through the R&D claims process - which is very specialist and frought with risk.
However, some expenditure incurred on R&D would never qualify for Capital Allowances so the only way to get the R&D claim would be to go through the R&D claims process - which is very specialist and frought with risk.
Eric Mc said:
Claim throughCapital Allowances if possible - as they can be up to 100% - and are less contentious than R&D claims.
However, some expenditure incurred on R&D would never qualify for Capital Allowances so the only way to get the R&D claim would be to go through the R&D claims process - which is very specialist and frought with risk.
That's a very fair shout.However, some expenditure incurred on R&D would never qualify for Capital Allowances so the only way to get the R&D claim would be to go through the R&D claims process - which is very specialist and frought with risk.
I think in order to do that, I'd have to separate the 'habitation box and contents' with the 'van it's fitted to'. Have the van as a company car asset at 6% Capital allowances, but the box could attract 100% capital allowance.
My concern there, is as they're pretty integrated (heating/hot water for example powered by a feed from the van diesel tank, van bulkhead has a cutout for a pass through from box to van, etc.). The box could be removed in a couple of hours though - and it is the boxes that I'm planning on selling, not vans.
Sway said:
We've come up with a design for a very high spec motorhome that's unlike anything else on the market (in the UK/Europe at least, there's a couple of firms doing something broadly similar in the US). It's based on a Merc Sprinter Chassis Cab with a few modifications and a box on the back with some very expensive kit inside.
Plan is to build the prototype, which will be tested extensively prior to launch - and then ideally become a demonstrator, but using a second hand Sprinter as they're buttons (and new ones very, very much aren't!).
Based on what you've said i don't think it would be sufficient to qualify for R&D relief.Plan is to build the prototype, which will be tested extensively prior to launch - and then ideally become a demonstrator, but using a second hand Sprinter as they're buttons (and new ones very, very much aren't!).
https://www.gov.uk/guidance/corporation-tax-resear...
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