Capital expenditure & domestic/business split on Self Assess
Discussion
Two quick questions for the tax gurus 
So, I gather that anything that basically isn't a consumable for business use is capital expenditure, and should be noted as such on my return?
Since I buy most stuff over the internet these days (PC bits, peripherals, tools, software), I assume that simply having a digital copy for receipt of any purchase is adequate?
I also paid for a motor trader policy to cover the car use needed. I also drove to work to a full time job and did SDP driving.
So is it best for me for example, to take the total monthly payments over the tax period, and then remove the annual premium for a normal insurance policy over the same period (about half as much)
Or can I just put the whole lot through (seems a bit iffy)
I'm just going freelance this year but this is 10/11 return, so there isn't much to it except a list of invoices and a list of investing in new gear and operating costs.
A proper accountant will be consulted for 11/12 12/13 don't worry
Many thanks for any help!
Dave
So, I gather that anything that basically isn't a consumable for business use is capital expenditure, and should be noted as such on my return?
Since I buy most stuff over the internet these days (PC bits, peripherals, tools, software), I assume that simply having a digital copy for receipt of any purchase is adequate?
I also paid for a motor trader policy to cover the car use needed. I also drove to work to a full time job and did SDP driving.
So is it best for me for example, to take the total monthly payments over the tax period, and then remove the annual premium for a normal insurance policy over the same period (about half as much)
Or can I just put the whole lot through (seems a bit iffy)
I'm just going freelance this year but this is 10/11 return, so there isn't much to it except a list of invoices and a list of investing in new gear and operating costs.
A proper accountant will be consulted for 11/12 12/13 don't worry
Many thanks for any help!
Dave
Mr Whippy said:
Two quick questions for the tax gurus
So, I gather that anything that basically isn't a consumable for business use is capital expenditure, and should be noted as such on my return?
No - it has to be of a CAPITAL nature i.e. being used in the business and has a useful life exceeding a year. I would not capitalise anything costing less than £100. I would simply write it off as a cost to the profit and loss account.
Since I buy most stuff over the internet these days (PC bits, peripherals, tools, software), I assume that simply having a digital copy for receipt of any purchase is adequate?
As long as its retrievable for the next 6 to 8 years.
I also paid for a motor trader policy to cover the car use needed. I also drove to work to a full time job and did SDP driving.
So is it best for me for example, to take the total monthly payments over the tax period, and then remove the annual premium for a normal insurance policy over the same period (about half as much)
Or can I just put the whole lot through (seems a bit iffy)
Why not just claim 40p per mile (2010/11) and have done with it. It simplifies matters a lot.
I'm just going freelance this year but this is 10/11 return, so there isn't much to it except a list of invoices and a list of investing in new gear and operating costs.
A proper accountant will be consulted for 11/12 12/13 don't worry
Many thanks for any help!
Dave
Answers above.So, I gather that anything that basically isn't a consumable for business use is capital expenditure, and should be noted as such on my return?
No - it has to be of a CAPITAL nature i.e. being used in the business and has a useful life exceeding a year. I would not capitalise anything costing less than £100. I would simply write it off as a cost to the profit and loss account.
Since I buy most stuff over the internet these days (PC bits, peripherals, tools, software), I assume that simply having a digital copy for receipt of any purchase is adequate?
As long as its retrievable for the next 6 to 8 years.
I also paid for a motor trader policy to cover the car use needed. I also drove to work to a full time job and did SDP driving.
So is it best for me for example, to take the total monthly payments over the tax period, and then remove the annual premium for a normal insurance policy over the same period (about half as much)
Or can I just put the whole lot through (seems a bit iffy)
Why not just claim 40p per mile (2010/11) and have done with it. It simplifies matters a lot.
I'm just going freelance this year but this is 10/11 return, so there isn't much to it except a list of invoices and a list of investing in new gear and operating costs.
A proper accountant will be consulted for 11/12 12/13 don't worry
Many thanks for any help!
Dave
Hmm, so lots of things like a new HDD (£90), new laptop batteries (£70), new computer in component form built up (£800 total), is best done via profit/loss (ie, I can put it against profit for the year?)
For those tax years I was only making maybe £5000 tops doing jobs on weekends etc. But I spent maybe £1750 on extra insurance and bits and bobs over the year which I needed to do business.
As for the trade policy, it was only paid for so I could drive other vehicles so I could diagnose electrical issues with them on the road etc... however, it did come at a premium over my normal £700 ish car insurance.
I'm not sure how I could charge mileage for driving to my PAYE full time work place?!
Sorry, tax has suddenly become taxing haha!
I thought I had understood it but clearly there is a deeper layer of complexity
Dave
For those tax years I was only making maybe £5000 tops doing jobs on weekends etc. But I spent maybe £1750 on extra insurance and bits and bobs over the year which I needed to do business.
As for the trade policy, it was only paid for so I could drive other vehicles so I could diagnose electrical issues with them on the road etc... however, it did come at a premium over my normal £700 ish car insurance.
I'm not sure how I could charge mileage for driving to my PAYE full time work place?!
Sorry, tax has suddenly become taxing haha!
I thought I had understood it but clearly there is a deeper layer of complexity
Dave
If you buy ten computer items of £90 each, I would tend to capitalise the £900 as a "package". If I bought the odd sub £100 intermitantly through the year, I would write them off as "Repairs and Renewals".
There is an element of judgement required when deciding whether to capitalise or not.
Don't forget that even if you decide to treat the expenditure as "Capital", you are allowed write off 100% of the cost under the Annual Investment Allowance (maximum expenditure allowed in any one year £25,000).
As regards claiming motoring costs, the simplest procedure is to forget about trying to summarise and analyse actual motoring costs (including motor insurance). HMRC allows a sole trader to make a simple claimn of 40p for every business mile up to 10,000 miles. After 10,000 miles the rate drops to 25p.
For 2011/12 the rates are changed to 45p/25p.
There is an element of judgement required when deciding whether to capitalise or not.
Don't forget that even if you decide to treat the expenditure as "Capital", you are allowed write off 100% of the cost under the Annual Investment Allowance (maximum expenditure allowed in any one year £25,000).
As regards claiming motoring costs, the simplest procedure is to forget about trying to summarise and analyse actual motoring costs (including motor insurance). HMRC allows a sole trader to make a simple claimn of 40p for every business mile up to 10,000 miles. After 10,000 miles the rate drops to 25p.
For 2011/12 the rates are changed to 45p/25p.
OK, I'll have to look out for the write-off under capital allowance when I fill in the return. I'll probably bunch up the computer upgrade, and then the bunch of smaller purchases can just be written off as profit/loss.
That makes good sense!
As per the car mileage, in practice I have done zero business miles, people drive to me. I've driven perhaps 500 miles in other peoples cars with a laptop plugged in doing logging, where no customer is available to drive their own car.
The rest of the time I was driving to a consistent place of work as my full time job. Perhaps I did a few journeys testing out logging gear...
I was fairly certain driving to the same place to undertake work wasn't covered by business miles claims?
Thanks
Dave
That makes good sense!
As per the car mileage, in practice I have done zero business miles, people drive to me. I've driven perhaps 500 miles in other peoples cars with a laptop plugged in doing logging, where no customer is available to drive their own car.
The rest of the time I was driving to a consistent place of work as my full time job. Perhaps I did a few journeys testing out logging gear...
I was fairly certain driving to the same place to undertake work wasn't covered by business miles claims?
Thanks
Dave
You are correct about home to work miles.
The alternative way to claim motoring costs is to add up ALL your motoring costs in the year (fuel, servicing, insurance, MOT, repairs etc). Work out your total mileage for the year. Create a fraction based on business meleage v total mileage. Claim that fraction of the total motoring costs.
Then calculate the capital allowances available on teh vehicle (as set out in the HMRC Motor Car Capital Allowance rules). Claim a reduced level capital allowances based omn the business/total mileage fraction calculated above.
I still think the 40p/25p per mile system is simpler - especially for smaller sole traders.
The alternative way to claim motoring costs is to add up ALL your motoring costs in the year (fuel, servicing, insurance, MOT, repairs etc). Work out your total mileage for the year. Create a fraction based on business meleage v total mileage. Claim that fraction of the total motoring costs.
Then calculate the capital allowances available on teh vehicle (as set out in the HMRC Motor Car Capital Allowance rules). Claim a reduced level capital allowances based omn the business/total mileage fraction calculated above.
I still think the 40p/25p per mile system is simpler - especially for smaller sole traders.
As said though, I've done no real business miles.
The cover was for driving other cars for diagnostic purposes for clients, which I did perhaps every weekend or every other weekend.
My car is kinda irrelevant in the equation, it was the ability to drive any other car for business purposes on the MTP that made me buy it. Hmmmm...
The cover was for driving other cars for diagnostic purposes for clients, which I did perhaps every weekend or every other weekend.
My car is kinda irrelevant in the equation, it was the ability to drive any other car for business purposes on the MTP that made me buy it. Hmmmm...
OK, thanks Eric.
Do you think because it encompassed my car for normal car insurance purposes too, that I should split the cost?
Ie, about £750 for my normal car insurance (that is the actual average of what I paid before and after having MTP insurance), and £750 for the other half, which is about £1,500, or the sum of the MTP cost?
I assume that is what I can do with phone/internet which I also use for conversing with clients etc (half it for the business use part?)
I hope work buy me an 'accounting for dummies' book as a leaving gift
Do you think because it encompassed my car for normal car insurance purposes too, that I should split the cost?
Ie, about £750 for my normal car insurance (that is the actual average of what I paid before and after having MTP insurance), and £750 for the other half, which is about £1,500, or the sum of the MTP cost?
I assume that is what I can do with phone/internet which I also use for conversing with clients etc (half it for the business use part?)
I hope work buy me an 'accounting for dummies' book as a leaving gift
Mr Whippy said:
OK, thanks Eric.
Do you think because it encompassed my car for normal car insurance purposes too, that I should split the cost?
Ie, about £750 for my normal car insurance (that is the actual average of what I paid before and after having MTP insurance), and £750 for the other half, which is about £1,500, or the sum of the MTP cost?
I assume that is what I can do with phone/internet which I also use for conversing with clients etc (half it for the business use part?)
I hope work buy me an 'accounting for dummies' book as a leaving gift
Claim the element of the insurance that relates solely to the activity of driving other people's car in respect of the self employment activity. Use mileage if you need to apportion the costDo you think because it encompassed my car for normal car insurance purposes too, that I should split the cost?
Ie, about £750 for my normal car insurance (that is the actual average of what I paid before and after having MTP insurance), and £750 for the other half, which is about £1,500, or the sum of the MTP cost?
I assume that is what I can do with phone/internet which I also use for conversing with clients etc (half it for the business use part?)
I hope work buy me an 'accounting for dummies' book as a leaving gift
If self-employed, one can claim any finance costs related to the vehicle IN ADDITION to the 40p (45p for 2011-12) etc business mileage rates.
This concessionary treatment is limited to businesses with a turnover of less than the VAT threshold.
This does not apply to employees who can only claim for business mileage.
This concessionary treatment is limited to businesses with a turnover of less than the VAT threshold.
This does not apply to employees who can only claim for business mileage.
How many sole traders who submit their own self assessment tax return actually prepare a separate Income and Expenditure account or a set of Sole Trader accounts BEFORE they start entering the self employed details in the relevant boxes of the self assessment tax return.
Do you know that HMRC has the power to ask to see the underlying formal accounts behind the figures in the tax retyurn.
In other words, the figures in the tax return are not really detailed enough to satisfy the legal requirements of self assessment.
Do you know that HMRC has the power to ask to see the underlying formal accounts behind the figures in the tax retyurn.
In other words, the figures in the tax return are not really detailed enough to satisfy the legal requirements of self assessment.
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