accountants and cars for R&D
Discussion
Help---im a bit new to the world of the self employed taxation and accountants and not sure if i need a new one or not!!
My new company has two roles, i design and make hydrogen combustion enhancers for diesels and also nitrous oxide associated electronics, in order to test my products i need to drive and data log various vehicles with the devices fitted, "road testing" is the only way i can really test the hydrogen units on a variety of vehicles, my accountant tells me "no way" can you you get tax relief on a car used for R&D unless its in a workshop 24/7 connected to a machine? if my car is fitted with a unit and connected via OBD2 to a laptop for data logging does it not then become a tool everytime i drive it?, if i drive to the shops for a pint of milk in the evening then i'm still "data logging" or working arent i?, this is something i have to do for my business and not a sly effort to get a nice car avoiding tax(im disabled and can do that anyway), any suggestions guys and gals? do i need a new accountant maybe? can anyone suggest a good one?, also if i buy a test car which is not roadworthy, i.e no tax or mot and slicks then surely i cannot be taxed on it for private use? im very confused regarding all the above points any any help would be apprecciated,
thanks in advance
My new company has two roles, i design and make hydrogen combustion enhancers for diesels and also nitrous oxide associated electronics, in order to test my products i need to drive and data log various vehicles with the devices fitted, "road testing" is the only way i can really test the hydrogen units on a variety of vehicles, my accountant tells me "no way" can you you get tax relief on a car used for R&D unless its in a workshop 24/7 connected to a machine? if my car is fitted with a unit and connected via OBD2 to a laptop for data logging does it not then become a tool everytime i drive it?, if i drive to the shops for a pint of milk in the evening then i'm still "data logging" or working arent i?, this is something i have to do for my business and not a sly effort to get a nice car avoiding tax(im disabled and can do that anyway), any suggestions guys and gals? do i need a new accountant maybe? can anyone suggest a good one?, also if i buy a test car which is not roadworthy, i.e no tax or mot and slicks then surely i cannot be taxed on it for private use? im very confused regarding all the above points any any help would be apprecciated,
thanks in advance
I think your accountant is wrong in stating that NONE of your R & D based driving costs are allowable for tax purposes.
I would suggest that some formula could be worked out - in agreement with the Revenue if necessary - whereby a REASONABNLE PROPORTION of these motoring costs be allocated to R & D expenditure.
However, do not think that you are going to get a simple 100% tax write off of these costs (although that is one possible outcome). There are specific tax rules governing how tax relief can be obtained on R & D costs. This type of expenditure is treated more like a Capital Cost rather than a revenue expense. Therefore, tax relief would be obtained by reference to these special tax rules rather than simply allocating the cost to the business Profit and Loss account.
It is actually a rather specialist are and you might need more specialist advice.
I would suggest that some formula could be worked out - in agreement with the Revenue if necessary - whereby a REASONABNLE PROPORTION of these motoring costs be allocated to R & D expenditure.
However, do not think that you are going to get a simple 100% tax write off of these costs (although that is one possible outcome). There are specific tax rules governing how tax relief can be obtained on R & D costs. This type of expenditure is treated more like a Capital Cost rather than a revenue expense. Therefore, tax relief would be obtained by reference to these special tax rules rather than simply allocating the cost to the business Profit and Loss account.
It is actually a rather specialist are and you might need more specialist advice.
Edited by Eric Mc on Sunday 19th August 11:15
First I would check with your current accountant to see if he/she is familiar with the tax treatment of R & D expenditure.
It's not that difficult to find out the details. I spent about 5 minutes this morning having a quick check in my Tolley's Tax Guide and found a lot of useful information fairly quickly. Any decent accountant would have access to this or a similar publication.
If you are not satisfied with the response from your current accountnat, then all I can suggest is that you start shopping around for a better one. There are thousands out there ranging from large operations to small one man band practices. You have to weigh up the quality of the advice you might get against the fee levels you will be expected to pay.
It's not that difficult to find out the details. I spent about 5 minutes this morning having a quick check in my Tolley's Tax Guide and found a lot of useful information fairly quickly. Any decent accountant would have access to this or a similar publication.
If you are not satisfied with the response from your current accountnat, then all I can suggest is that you start shopping around for a better one. There are thousands out there ranging from large operations to small one man band practices. You have to weigh up the quality of the advice you might get against the fee levels you will be expected to pay.
being a bit new to this im not sure which way to go, presumably if i ask my accountant to look into it he will charge me for his time? makes me wonder if i might be better just changing?, sorry if the questions sound a bit obvious but clearly this is something i need to get right before things grow much more
Most accountants charge on a time basis. Some (like me) are less glued to our time sheets than some but essentially it is the best way to gauge the right level of fees to charge a client. It is the norm in most professional services (solicitors, architects, surveyors etc).
It is best to agree an up front fee from your accountant in advance of any work being done for you. This fee can later be reviewed (usually after the first year) and, if the accountant thinks that the fee is not reflective of the work he/she is doing for you, it is up to him/her to explain the situation to you as the client and increase the fee accordingly for future years.
You should get a clear indication from the accountant of the work that he/she has undertaken to do for you and you should be aware of what constitutes "additional" work over and above what was originally agreed. These "terms and conditions" are normally set out in a "Letter of Engagement" which your accountant should have asked to you to look at, agree and sign.
It is best to agree an up front fee from your accountant in advance of any work being done for you. This fee can later be reviewed (usually after the first year) and, if the accountant thinks that the fee is not reflective of the work he/she is doing for you, it is up to him/her to explain the situation to you as the client and increase the fee accordingly for future years.
You should get a clear indication from the accountant of the work that he/she has undertaken to do for you and you should be aware of what constitutes "additional" work over and above what was originally agreed. These "terms and conditions" are normally set out in a "Letter of Engagement" which your accountant should have asked to you to look at, agree and sign.
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