Financing a replacement van - Tax question
Discussion
Time for newer van - previously I've bought old sub £1000 sheds and scrapped them when they expire. Even though they have been used on a roughly 50/50 buisness and private use split I've never taken funds specifically from the buisness to buy them and I've never depreciated them through my tax return either - all I've done is claimed 40p a mile when they've been used for work.
Time to replace the dead one now. I'm thinking of spending about £2.5k and will be buying it from savings - there is not enough cash in the buisness account to pay for it and I'm not taking out a loan.
Questions for anybody who knows - what's the best way to do this?. If I effectively transfer funds into the buisness by financing the van purchase from my own cash do I still depreciate the van for half it's remaining value each year through my tax return even if it's also used privately and do I still claim 40p a mile for buisness and work travel on top of the ammount I claim in reduced value each year?
Basic stuff maybe - but if anybody knows the answers advice or links would be appreciated. Cheers Chaps
Time to replace the dead one now. I'm thinking of spending about £2.5k and will be buying it from savings - there is not enough cash in the buisness account to pay for it and I'm not taking out a loan.
Questions for anybody who knows - what's the best way to do this?. If I effectively transfer funds into the buisness by financing the van purchase from my own cash do I still depreciate the van for half it's remaining value each year through my tax return even if it's also used privately and do I still claim 40p a mile for buisness and work travel on top of the ammount I claim in reduced value each year?
Basic stuff maybe - but if anybody knows the answers advice or links would be appreciated. Cheers Chaps
Jaguar steve said:
Time for newer van - previously I've bought old sub £1000 sheds and scrapped them when they expire. Even though they have been used on a roughly 50/50 buisness and private use split I've never taken funds specifically from the buisness to buy them and I've never depreciated them through my tax return either - all I've done is claimed 40p a mile when they've been used for work.
Time to replace the dead one now. I'm thinking of spending about £2.5k and will be buying it from savings - there is not enough cash in the buisness account to pay for it and I'm not taking out a loan.
Questions for anybody who knows - what's the best way to do this?. If I effectively transfer funds into the buisness by financing the van purchase from my own cash do I still depreciate the van for half it's remaining value each year through my tax return even if it's also used privately and do I still claim 40p a mile for buisness and work travel on top of the ammount I claim in reduced value each year?
Basic stuff maybe - but if anybody knows the answers advice or links would be appreciated. Cheers Chaps
Are you a sole trader or limited company?Time to replace the dead one now. I'm thinking of spending about £2.5k and will be buying it from savings - there is not enough cash in the buisness account to pay for it and I'm not taking out a loan.
Questions for anybody who knows - what's the best way to do this?. If I effectively transfer funds into the buisness by financing the van purchase from my own cash do I still depreciate the van for half it's remaining value each year through my tax return even if it's also used privately and do I still claim 40p a mile for buisness and work travel on top of the ammount I claim in reduced value each year?
Basic stuff maybe - but if anybody knows the answers advice or links would be appreciated. Cheers Chaps
Any personal money you use to purchase the vehicle will be shown in your Accounts Balance Sheets as cash/capital introduced.
Van a,4000.00
WDA 25.00% b.1000.00x 90%business use 900.00
c.3000.00
Case 1 Computation
Net Profit 20000.00
Add Depreciation 1000.00
21000.00
Less Capital Allowances 900.00
Assessable Profits 20100.00
a, is your purchase price and will inclusive of VAT if you are not VAT registered, exclusive of VAT if you are VAT registered and can reclaim the VAT.
b, Is the depreciation amount, and I have only taken 25% allowance since you have not had a good trading year.
c, is the figure that you will carry forward for next year, so will then become figure (a).
The depreciation figure (b) is treated as an expense/overhead, so deducted from your gross turnover/ sales figure to arrive at a net profit figure.
I am not an accountant, and certainly an accountant, the costs of which are tax allowable, will possibly be able to save you more in tax, than what they charge.
Van a,4000.00
WDA 25.00% b.1000.00x 90%business use 900.00
c.3000.00
Case 1 Computation
Net Profit 20000.00
Add Depreciation 1000.00
21000.00
Less Capital Allowances 900.00
Assessable Profits 20100.00
a, is your purchase price and will inclusive of VAT if you are not VAT registered, exclusive of VAT if you are VAT registered and can reclaim the VAT.
b, Is the depreciation amount, and I have only taken 25% allowance since you have not had a good trading year.
c, is the figure that you will carry forward for next year, so will then become figure (a).
The depreciation figure (b) is treated as an expense/overhead, so deducted from your gross turnover/ sales figure to arrive at a net profit figure.
I am not an accountant, and certainly an accountant, the costs of which are tax allowable, will possibly be able to save you more in tax, than what they charge.
Edited by Wings on Friday 26th February 22:42
Edited by Wings on Friday 26th February 22:54
Wings said:
Any personal money you use to purchase the vehicle will be shown in your Accounts Balance Sheets as cash/capital introduced.
Van a,4000.00
WDA 25.00% b.1000.00x 90%business use 900.00
c.3000.00
Case 1 Computation
Net Profit 20000.00
Add Depreciation 1000.00
21000.00
Less Capital Allowances 900.00
Assessable Profits 20100.00
a, is your purchase price and will inclusive of VAT if you are not VAT registered, exclusive of VAT if you are VAT registered and can reclaim the VAT.
b, Is the depreciation amount, and I have only taken 25% allowance since you have not had a good trading year.
c, is the figure that you will carry forward for next year, so will then become figure (a).
The depreciation figure (b) is treated as an expense/overhead, so deducted from your gross turnover/ sales figure to arrive at a net profit figure.
I am not an accountant, and certainly an accountant, the costs of which are tax allowable, will possibly be able to save you more in tax, than what they charge.
Thanks Wings. Right, I'm a sole trader and not VAT registered. Planning to spend around £2500 as this seems to be the break point where good value vans starts. Buisness / Private use split is around 40/60%.Van a,4000.00
WDA 25.00% b.1000.00x 90%business use 900.00
c.3000.00
Case 1 Computation
Net Profit 20000.00
Add Depreciation 1000.00
21000.00
Less Capital Allowances 900.00
Assessable Profits 20100.00
a, is your purchase price and will inclusive of VAT if you are not VAT registered, exclusive of VAT if you are VAT registered and can reclaim the VAT.
b, Is the depreciation amount, and I have only taken 25% allowance since you have not had a good trading year.
c, is the figure that you will carry forward for next year, so will then become figure (a).
The depreciation figure (b) is treated as an expense/overhead, so deducted from your gross turnover/ sales figure to arrive at a net profit figure.
I am not an accountant, and certainly an accountant, the costs of which are tax allowable, will possibly be able to save you more in tax, than what they charge.
Edited by Wings on Friday 26th February 22:42
Edited by Wings on Friday 26th February 22:54
Buisness is run as a part time hobby with profits of less than £15k pa and has very simple accounting. Accountant has told me more than once he'll charge a lot more for managing finances than he can save me in tax so I'm on my own on this one.
Just a couple of questions - I see WDA is the first years depreciation. Why have you added depreciation to profit in your example? Depreciation is a loss surely and should be taken away? Is the depreciation allowance variable according to trading conditions? I though depreciating any buisness assets were fixed at 50% in the first year, 50% of the remainder in the second, 50% of the remainder in the third and so on.
Appreciate your advice - Thanks
Depreciation is used by accountants to take into account the fact that an asset is "wearing out" iover time. It is a method of writing off the cost of the asset over its expected useful life. With a vehicle, that is usually around 4 to 5 years.
HM Revenue and Customs does not allow Depreciation as a business expense when calculating the taxable profit of the business. That is the reason why the accounting Depreciation Charge has to be added back on to the business profit in the "tax computation". HMRC are not being particularly mean. The reason they add depreciation back is because they substitute their own version of "Depreciation" - which they call "Capital Allowances.
Unlike Depreciation, Capital Allowances are not based solely on the expected useful life of the asset. The rates used for certain assets are often there to encourage businesses to invest in certain types of assets, such as computers, or eco-friendly vehicles. In those cases. the Capital Allowance rates can be very generous and therefore better than standard depreciation rates.
On the other hand, some Capital Allowance rates are WORSE than what the normal depreciation rate would be - such as the 10% rate used on high CO2 emitting cars.
The good news on vans is that HMRC allow these to be written off in the year of purchase. Vans are treated as Plant and Machionery for tax purposes and are elgible for the 100% Annual Investment Allowance (AIA).
So, in yiour accounts the van would be depreciated in the normal way - say at 25%. However, in the tax computation, the depreciation is added back to the profits and the 100% Annual Investment Allowance is inserted in its place.
Now is a very good time to BUY a van.
However, you can only claim the AIA if you
buy the van outright
buy it using a bank loan
buy the van on an HP
Without getting too complicated, if you acquire the van using a Lease Agreement, you will not be able to claim the 100% AIA.
HM Revenue and Customs does not allow Depreciation as a business expense when calculating the taxable profit of the business. That is the reason why the accounting Depreciation Charge has to be added back on to the business profit in the "tax computation". HMRC are not being particularly mean. The reason they add depreciation back is because they substitute their own version of "Depreciation" - which they call "Capital Allowances.
Unlike Depreciation, Capital Allowances are not based solely on the expected useful life of the asset. The rates used for certain assets are often there to encourage businesses to invest in certain types of assets, such as computers, or eco-friendly vehicles. In those cases. the Capital Allowance rates can be very generous and therefore better than standard depreciation rates.
On the other hand, some Capital Allowance rates are WORSE than what the normal depreciation rate would be - such as the 10% rate used on high CO2 emitting cars.
The good news on vans is that HMRC allow these to be written off in the year of purchase. Vans are treated as Plant and Machionery for tax purposes and are elgible for the 100% Annual Investment Allowance (AIA).
So, in yiour accounts the van would be depreciated in the normal way - say at 25%. However, in the tax computation, the depreciation is added back to the profits and the 100% Annual Investment Allowance is inserted in its place.
Now is a very good time to BUY a van.
However, you can only claim the AIA if you
buy the van outright
buy it using a bank loan
buy the van on an HP
Without getting too complicated, if you acquire the van using a Lease Agreement, you will not be able to claim the 100% AIA.
As usual all that Eric Mc states is correct, whilst my example was one of 25% depreciation, there is, for a van, a maximum allowable depreciation of 100% in the first accounting year of purchase, but whether you take the maximum depreciation will/may depend on other factors.
“You are what you are”, this was always the case with me when business vehicles, I could never buy new from a dealer’s showroom, with depreciation from the dealer’s showroom price to street price stopping me. So all my vehicles, from vans to a Porsche, Mercedes Benz have been formerly leased vehicles purchased from auction establishments, and as Eric Mc stated now is the time to get a good deal on buying vans. If you require a username and password for viewing online nationwide pending sales/auctions of vehicles then pm me.
There are other tax allowable expenses you can deduct/claim, such as the use of one room of your home for accounting/office purposes, a percentage deduction of one’s overall home service charges, used in the running of a business ie. electric, telephone etc.
To conclude, it is not about how much you earn, but more about how much you keep, and that is where an accountant like Eric Mc can both assist you with, at the same time making your accounts and tax return more acceptable to HMR&C.
“You are what you are”, this was always the case with me when business vehicles, I could never buy new from a dealer’s showroom, with depreciation from the dealer’s showroom price to street price stopping me. So all my vehicles, from vans to a Porsche, Mercedes Benz have been formerly leased vehicles purchased from auction establishments, and as Eric Mc stated now is the time to get a good deal on buying vans. If you require a username and password for viewing online nationwide pending sales/auctions of vehicles then pm me.
There are other tax allowable expenses you can deduct/claim, such as the use of one room of your home for accounting/office purposes, a percentage deduction of one’s overall home service charges, used in the running of a business ie. electric, telephone etc.
To conclude, it is not about how much you earn, but more about how much you keep, and that is where an accountant like Eric Mc can both assist you with, at the same time making your accounts and tax return more acceptable to HMR&C.
Jaguar steve said:
gg
Way to go if so
That's a big enough incentive to suggest that now's the time to pay an accountant to get that right and just make sure I've not got anything else - like Wings suggestion of using a room at home as an office, which I do - for example but have never claimed for sorted too
Eric Mc said:
Depreciation is used by accountants to take into account the fact that an asset is "wearing out" iover time. It is a method of writing off the cost of the asset over its expected useful life. With a vehicle, that is usually around 4 to 5 years.
HM Revenue and Customs does not allow Depreciation as a business expense when calculating the taxable profit of the business. That is the reason why the accounting Depreciation Charge has to be added back on to the business profit in the "tax computation". HMRC are not being particularly mean. The reason they add depreciation back is because they substitute their own version of "Depreciation" - which they call "Capital Allowances.
Unlike Depreciation, Capital Allowances are not based solely on the expected useful life of the asset. The rates used for certain assets are often there to encourage businesses to invest in certain types of assets, such as computers, or eco-friendly vehicles. In those cases. the Capital Allowance rates can be very generous and therefore better than standard depreciation rates.
On the other hand, some Capital Allowance rates are WORSE than what the normal depreciation rate would be - such as the 10% rate used on high CO2 emitting cars.
The good news on vans is that HMRC allow these to be written off in the year of purchase. Vans are treated as Plant and Machionery for tax purposes and are elgible for the 100% Annual Investment Allowance (AIA).
So, in yiour accounts the van would be depreciated in the normal way - say at 25%. However, in the tax computation, the depreciation is added back to the profits and the 100% Annual Investment Allowance is inserted in its place.
Now is a very good time to BUY a van.
However, you can only claim the AIA if you
buy the van outright
buy it using a bank loan
buy the van on an HP
Without getting too complicated, if you acquire the van using a Lease Agreement, you will not be able to claim the 100% AIA.
Thanks Eric - so basicaly no need to depreciate a van at 25% pa each year. Just buy one for £2/3000 and just put the entire purchase price down to AIA in next years tax return? Is that still allowable if the van is bought for the buisness but used privately too?HM Revenue and Customs does not allow Depreciation as a business expense when calculating the taxable profit of the business. That is the reason why the accounting Depreciation Charge has to be added back on to the business profit in the "tax computation". HMRC are not being particularly mean. The reason they add depreciation back is because they substitute their own version of "Depreciation" - which they call "Capital Allowances.
Unlike Depreciation, Capital Allowances are not based solely on the expected useful life of the asset. The rates used for certain assets are often there to encourage businesses to invest in certain types of assets, such as computers, or eco-friendly vehicles. In those cases. the Capital Allowance rates can be very generous and therefore better than standard depreciation rates.
On the other hand, some Capital Allowance rates are WORSE than what the normal depreciation rate would be - such as the 10% rate used on high CO2 emitting cars.
The good news on vans is that HMRC allow these to be written off in the year of purchase. Vans are treated as Plant and Machionery for tax purposes and are elgible for the 100% Annual Investment Allowance (AIA).
So, in yiour accounts the van would be depreciated in the normal way - say at 25%. However, in the tax computation, the depreciation is added back to the profits and the 100% Annual Investment Allowance is inserted in its place.
Now is a very good time to BUY a van.
However, you can only claim the AIA if you
buy the van outright
buy it using a bank loan
buy the van on an HP
Without getting too complicated, if you acquire the van using a Lease Agreement, you will not be able to claim the 100% AIA.
Way to go if so
That's a big enough incentive to suggest that now's the time to pay an accountant to get that right and just make sure I've not got anything else - like Wings suggestion of using a room at home as an office, which I do - for example but have never claimed for sorted tooYou can still claim the AIA even if the asset has some private use element. You just restrict the AIA claim by the Private Use percentage - which in the case of a van would be based on your business mileage in the year versus private mileage.
Although I'm biased, I think it is remiss of anyone who is self employed NOT to use an accountant.
Tax rules are complex and constantly changing.
I had a client phone me up in December saying that he planned to submit his own tax return and self employed details to HMRC - in order to save on accountancy fees. The following conversation ensued
Me - "Fair enough, you did buy a van this year, didn't you".
Client - "Yes".
Me - "Are you planning on claiming the Anuual Investment Allowance"
Client - "I don't know. What's the Annual Investment Allowance?"
I explained this to him and calculated that his saving of a £300 accountancy fee would have cost him £3,220 in extra tax and Class 4 NI (and an additional amount added onto his January and July 2010 Payments on Account of £3,220 to boot.
Needless to say, he decided to use my services.
Although I'm biased, I think it is remiss of anyone who is self employed NOT to use an accountant.
Tax rules are complex and constantly changing.
I had a client phone me up in December saying that he planned to submit his own tax return and self employed details to HMRC - in order to save on accountancy fees. The following conversation ensued
Me - "Fair enough, you did buy a van this year, didn't you".
Client - "Yes".
Me - "Are you planning on claiming the Anuual Investment Allowance"
Client - "I don't know. What's the Annual Investment Allowance?"
I explained this to him and calculated that his saving of a £300 accountancy fee would have cost him £3,220 in extra tax and Class 4 NI (and an additional amount added onto his January and July 2010 Payments on Account of £3,220 to boot.
Needless to say, he decided to use my services.
Edited by Eric Mc on Saturday 27th February 14:32
Eric Mc said:
You can still claim the AIA even if the asset has some private use element. You just restrict the AIA claim by the Private Use percentage - which in the case of a van would be based on your business mileage in the year versus private mileage.
Although I'm biased, I think it is remiss of anyone who is self employed NOT to use an accountant.
Tax rules are complex and constantly changing.
I had a client phone me up in December saying that he planned to submit his own tax return and self employed details to HMRC - in order to save on accountancy fees. The following conversation ensued
Me - "Fair enough, you did buy a van this year, didn't you".
Client - "Yes".
Me - "Are you planning on claiming the Anuual Investment Allowance"
Client - "I don't know. What's the Annual Investment Allowance?"
I explained this to him and calculated that his saving of a £300 accountancy fee would have cost him £3,220 in extra tax and Class 4 NI (and an additional amount added onto his January and July 2010 Payments on Account of £3,220 to boot.
Needless to say, he decided to use my services.
Thanks for advice Eric - point well illustrated and taken about accountants fee value too. Although I'm biased, I think it is remiss of anyone who is self employed NOT to use an accountant.
Tax rules are complex and constantly changing.
I had a client phone me up in December saying that he planned to submit his own tax return and self employed details to HMRC - in order to save on accountancy fees. The following conversation ensued
Me - "Fair enough, you did buy a van this year, didn't you".
Client - "Yes".
Me - "Are you planning on claiming the Anuual Investment Allowance"
Client - "I don't know. What's the Annual Investment Allowance?"
I explained this to him and calculated that his saving of a £300 accountancy fee would have cost him £3,220 in extra tax and Class 4 NI (and an additional amount added onto his January and July 2010 Payments on Account of £3,220 to boot.
Needless to say, he decided to use my services.
Edited by Eric Mc on Saturday 27th February 14:32
Eric Mc said:
You can still claim the AIA even if the asset has some private use element. You just restrict the AIA claim by the Private Use percentage - which in the case of a van would be based on your business mileage in the year versus private mileage.
Although I'm biased, I think it is remiss of anyone who is self employed NOT to use an accountant.
Tax rules are complex and constantly changing.
I had a client phone me up in December saying that he planned to submit his own tax return and self employed details to HMRC - in order to save on accountancy fees. The following conversation ensued
Me - "Fair enough, you did buy a van this year, didn't you".
Client - "Yes".
Me - "Are you planning on claiming the Anuual Investment Allowance"
Client - "I don't know. What's the Annual Investment Allowance?"
I explained this to him and calculated that his saving of a £300 accountancy fee would have cost him £3,220 in extra tax and Class 4 NI (and an additional amount added onto his January and July 2010 Payments on Account of £3,220 to boot.
Needless to say, he decided to use my services.
I wouldn't be without an accountant, even if it is just the wife and me in partnership!Although I'm biased, I think it is remiss of anyone who is self employed NOT to use an accountant.
Tax rules are complex and constantly changing.
I had a client phone me up in December saying that he planned to submit his own tax return and self employed details to HMRC - in order to save on accountancy fees. The following conversation ensued
Me - "Fair enough, you did buy a van this year, didn't you".
Client - "Yes".
Me - "Are you planning on claiming the Anuual Investment Allowance"
Client - "I don't know. What's the Annual Investment Allowance?"
I explained this to him and calculated that his saving of a £300 accountancy fee would have cost him £3,220 in extra tax and Class 4 NI (and an additional amount added onto his January and July 2010 Payments on Account of £3,220 to boot.
Needless to say, he decided to use my services.
I will be changing my Renault Master before the end of the tax year. There are some great deals about. £8k off the price of a new one is very tempting!
Although the total cost of my existing van is now written off, can I keep the money I get from its resale from the taxman?
Grandad Gaz said:
Eric Mc said:
You can still claim the AIA even if the asset has some private use element. You just restrict the AIA claim by the Private Use percentage - which in the case of a van would be based on your business mileage in the year versus private mileage.
Although I'm biased, I think it is remiss of anyone who is self employed NOT to use an accountant.
Tax rules are complex and constantly changing.
I had a client phone me up in December saying that he planned to submit his own tax return and self employed details to HMRC - in order to save on accountancy fees. The following conversation ensued
Me - "Fair enough, you did buy a van this year, didn't you".
Client - "Yes".
Me - "Are you planning on claiming the Anuual Investment Allowance"
Client - "I don't know. What's the Annual Investment Allowance?"
I explained this to him and calculated that his saving of a £300 accountancy fee would have cost him £3,220 in extra tax and Class 4 NI (and an additional amount added onto his January and July 2010 Payments on Account of £3,220 to boot.
Needless to say, he decided to use my services.
I wouldn't be without an accountant, even if it is just the wife and me in partnership!Although I'm biased, I think it is remiss of anyone who is self employed NOT to use an accountant.
Tax rules are complex and constantly changing.
I had a client phone me up in December saying that he planned to submit his own tax return and self employed details to HMRC - in order to save on accountancy fees. The following conversation ensued
Me - "Fair enough, you did buy a van this year, didn't you".
Client - "Yes".
Me - "Are you planning on claiming the Anuual Investment Allowance"
Client - "I don't know. What's the Annual Investment Allowance?"
I explained this to him and calculated that his saving of a £300 accountancy fee would have cost him £3,220 in extra tax and Class 4 NI (and an additional amount added onto his January and July 2010 Payments on Account of £3,220 to boot.
Needless to say, he decided to use my services.
I will be changing my Renault Master before the end of the tax year. There are some great deals about. £8k off the price of a new one is very tempting!
Although the total cost of my existing van is now written off, can I keep the money I get from its resale from the taxman?
As well as using an accountant, one also needs to look at the implications of a new political party in government in the UK, when that will no doubt lead to an increase in tax rates. So the easy option might be to take the 100% allowance on a vehicle purchase, whereby the best option might be to roll over some of the allowance to the next accounting/tax year.
It's worth pointing out that not all accountants are as good, or as interested, or as proactive as Eric. I've had two in the past and each of them was a waste of time, who simply re-acted to what I had done and never once, although provided with the opportunity to do so, gave me any advice on which to base future actions.
Jaguar steve said:
Wings said:
Any personal money you use to purchase the vehicle will be shown in your Accounts Balance Sheets as cash/capital introduced.
Van a,4000.00
WDA 25.00% b.1000.00x 90%business use 900.00
c.3000.00
Case 1 Computation
Net Profit 20000.00
Add Depreciation 1000.00
21000.00
Less Capital Allowances 900.00
Assessable Profits 20100.00
a, is your purchase price and will inclusive of VAT if you are not VAT registered, exclusive of VAT if you are VAT registered and can reclaim the VAT.
b, Is the depreciation amount, and I have only taken 25% allowance since you have not had a good trading year.
c, is the figure that you will carry forward for next year, so will then become figure (a).
The depreciation figure (b) is treated as an expense/overhead, so deducted from your gross turnover/ sales figure to arrive at a net profit figure.
I am not an accountant, and certainly an accountant, the costs of which are tax allowable, will possibly be able to save you more in tax, than what they charge.
Thanks Wings. Right, I'm a sole trader and not VAT registered. Planning to spend around £2500 as this seems to be the break point where good value vans starts. Buisness / Private use split is around 40/60%.Van a,4000.00
WDA 25.00% b.1000.00x 90%business use 900.00
c.3000.00
Case 1 Computation
Net Profit 20000.00
Add Depreciation 1000.00
21000.00
Less Capital Allowances 900.00
Assessable Profits 20100.00
a, is your purchase price and will inclusive of VAT if you are not VAT registered, exclusive of VAT if you are VAT registered and can reclaim the VAT.
b, Is the depreciation amount, and I have only taken 25% allowance since you have not had a good trading year.
c, is the figure that you will carry forward for next year, so will then become figure (a).
The depreciation figure (b) is treated as an expense/overhead, so deducted from your gross turnover/ sales figure to arrive at a net profit figure.
I am not an accountant, and certainly an accountant, the costs of which are tax allowable, will possibly be able to save you more in tax, than what they charge.
Edited by Wings on Friday 26th February 22:42
Edited by Wings on Friday 26th February 22:54
Buisness is run as a part time hobby with profits of less than £15k pa and has very simple accounting. Accountant has told me more than once he'll charge a lot more for managing finances than he can save me in tax so I'm on my own on this one.
Just a couple of questions - I see WDA is the first years depreciation. Why have you added depreciation to profit in your example? Depreciation is a loss surely and should be taken away? Is the depreciation allowance variable according to trading conditions? I though depreciating any buisness assets were fixed at 50% in the first year, 50% of the remainder in the second, 50% of the remainder in the third and so on.
Appreciate your advice - Thanks
The WDA figure can be variable, and March (if one’s accounts ended 5 April) was the time of the accounting year when one should be deciding how one is going to prepare their accounts to the tax man, for whilst WDA can reduce one’s taxable profits, there are other taxable allowances that one should use up first before the end of the tax year.
There is a difference between how one shows depreciation in trading accounts and for in net business profits for tax purposes. The depreciation amount/figure is added as an operating cost, so included in the total expenses of running your business, but for tax purposes an adjustment is made. This involves adding back, on to the net profit (or loss) the depreciation figure, then deducting the tax allowable figure (business use), thereby arriving at your tax accessable profit figure. My example is for a business with an operating net business profit, for a loss than the tax procedure would be slightly different.
Many accountants are merely book keepers, and are no different than any trades person, and if you are not satisfied with your present accountant, then find another one. In these times, both the internet and the accounting software available, there is no longer any need to have an accountant in the next street, same village or town, now the accountant can be on the other side of the UK, at the end of an internet/broadband connection.
Lastly, I am not an accountant and neither have I had any training, being self taught, so for your own peace of mind seek further advice from those who are accountants.
Many "practising" accountants are not qualified. There is no legal requirement to have passed any accounting or tax exams to set yourself up as an accountant or tax advisor.
Since 2008, non-qualified book-keepers and accountants in practice are supposed to register directly with HMRC.
I wonder how many of these people have actually done that?
Qualifieds don't need to register as they are, in theory, monitored by their own professional governing body.
Since 2008, non-qualified book-keepers and accountants in practice are supposed to register directly with HMRC.
I wonder how many of these people have actually done that?
Qualifieds don't need to register as they are, in theory, monitored by their own professional governing body.
Edited by Eric Mc on Sunday 28th February 12:45
lestag said:
Eric Mc said:
Many "practising" accountants are not qualified.
OMG - They are just like IT people! 
and builders! and a lot of other occupations...There have been recognised accounting qualifications since the mid 1800s.
The interesting thing now is that "non-qulaified" accountants need to self-declare their activities to the UK government who will now directly regulate them.
I bet that doesn't happen in IT.
Edited by Eric Mc on Monday 1st March 09:57
Eric Mc said:
The interesting thing now is that "non-qulaified" accountants need to self-declare their activities to the UK government who will now directly regulate them.
I bet that doesn't happen in IT.
True, not yet... but here in NZ , due to a little thing called leaky buildings I bet that doesn't happen in IT.
http://www.consumerbuild.org.nz/publish/leaky.php
which will cost the taxpayer/ratepayer (yes we get double whammied) 11 - 22 billion (5 - 10 billion pounds)... we now have our builders registered .... Licensing system aims to weed out 'cowboy' builders
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