Small Company VAT Question/Capital Allowances
Discussion
A friend needs a new work PC. He has his own company, with just the one employee (himself) and operates as a consultant. He is VAT registered. If he purchases a new PC, is he elegible to reclaim the VAT on the purchase and can he claim capital allowances? Is he can claim capital allowances, is he likely to be eligible for first year allowance at 50%?
Any assistance much appreciated.
Many Thanks
Any assistance much appreciated.
Many Thanks
PhillF said:
A friend needs a new work PC. He has his own company, with just the one employee (himself) and operates as a consultant. He is VAT registered. If he purchases a new PC, is he elegible to reclaim the VAT on the purchase and can he claim capital allowances? Is he can claim capital allowances, is he likely to be eligible for first year allowance at 50%?
Any assistance much appreciated.
Many Thanks
Yes he can reclaim the VAT and the first year capital allowance of 50%.Any assistance much appreciated.
Many Thanks
How does he pay his VAT? i.e. is it calculated or flat?
Might be better to wait until the next tax year, when they (alledgedly!) are going to allow 100% reclaiming of expenditure (up to a certain limit - but more to stop vehicles and properties being purchased). Does he not already have an expenditure allowance? Has he already used this?
Might be better to wait until the next tax year, when they (alledgedly!) are going to allow 100% reclaiming of expenditure (up to a certain limit - but more to stop vehicles and properties being purchased). Does he not already have an expenditure allowance? Has he already used this?
PhillF said:
Only VAT so far has been that charged to clients and repaid over to HMRC on a quarterly basis.
No input VAT at all. Will it be a straight deduction?
Yes, so if Sales VAT is £350.00, and computer inclusive VAT price is £1,175.00 (VAT £175.00), then one deducts £175.00 from Sales VAT £350.00 and HMR&C are due the balance being £175.00.No input VAT at all. Will it be a straight deduction?
Then the exclusive cost price of the computer £1,000.00, for the first accounting tax year there is a capital allowance of 50%, with the balance of £500.00 being carried forward, where for the remaining years there are/is an allowance of 25%.
Capital allowances from April 2008
The systems of capital allowances for plant, machinery and buildings are undergoing extensive reform. Most of the changes happen from 1 April 2008 for companies, and from 6 April 2008 for unincorporated businesses.
The first year allowances currently available for purchases of equipment at 50% for small businesses, and 40% for medium sized businesses, will cease in April 2008. Instead all sizes of business will get an Annual Investment Allowance (AIA) for purchases of equipment of up to £50,000 per accounting period. Where the accounting year does not run to 31 March the first AIA will be proportionally reduced.
The writing down allowances for plant and machinery are also being reduced from 25% to 20%, but with a transitional rate for accounting periods that straddle 1 April 2008. For the accounting year to 31 December 2008 the business will get a transitional capital allowance rate of 21.25% on all existing equipment, and on any new purchases that exceed the AIA. You may need to advise your clients whether to purchase new equipment before or after 1 or 6 April 2008, or before the end of their accounting current period.
Another change will affect the tax deduction for the cost of equipment attached to buildings, called integral fixtures. Currently such fixtures qualify for a 25% writing down allowance, but for purchases on or after 1 April 2008 (or 6 April) the rate of the allowance will only be 10%. Its not clear yet exactly which assets will be classified as integral fixtures, but its likely to include central hearing and air conditioning systems, and possibly hot and cold water systems and lighting and power systems.
Outline of new rules for capital allowances
http://www.hm-treasury.gov.uk/media/C/4/consult_bu...
The systems of capital allowances for plant, machinery and buildings are undergoing extensive reform. Most of the changes happen from 1 April 2008 for companies, and from 6 April 2008 for unincorporated businesses.
The first year allowances currently available for purchases of equipment at 50% for small businesses, and 40% for medium sized businesses, will cease in April 2008. Instead all sizes of business will get an Annual Investment Allowance (AIA) for purchases of equipment of up to £50,000 per accounting period. Where the accounting year does not run to 31 March the first AIA will be proportionally reduced.
The writing down allowances for plant and machinery are also being reduced from 25% to 20%, but with a transitional rate for accounting periods that straddle 1 April 2008. For the accounting year to 31 December 2008 the business will get a transitional capital allowance rate of 21.25% on all existing equipment, and on any new purchases that exceed the AIA. You may need to advise your clients whether to purchase new equipment before or after 1 or 6 April 2008, or before the end of their accounting current period.
Another change will affect the tax deduction for the cost of equipment attached to buildings, called integral fixtures. Currently such fixtures qualify for a 25% writing down allowance, but for purchases on or after 1 April 2008 (or 6 April) the rate of the allowance will only be 10%. Its not clear yet exactly which assets will be classified as integral fixtures, but its likely to include central hearing and air conditioning systems, and possibly hot and cold water systems and lighting and power systems.
Outline of new rules for capital allowances
http://www.hm-treasury.gov.uk/media/C/4/consult_bu...
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