Quick self employed tax question ...

[markmarkymark]

Yo ...

for any self employed amongst you ... (this should be easy) ...

If one purchases say a disc drive for 100 pounds, you can get 50% tax allowance for the first year, and then 25% on the reducing balance in the years after that ....

i.e. 50% relief first year - leaving £50 (balance)

25% of that in the next year - leaving 25 (reducing balance).

Question is, how long do you continue?!!

thx

Mark

[Flubflow]

You continue until the item is taken out of the business. i.e. when it breaks or you replace it with a new one.

When you take it out of the capital allowances it is a "disposal" and is deducted from your capital expenditure (at its reduced balance value at the time of the disposal).

Why use capital allowances for a disk drive anway? You could class it as a computer repair and take 100% of the cost as a 1off business expense.

[markmarkymark]

Flub .....

Thanks indeed - it was a external drive - but I guess I could say it was a replacement for a duff internal (which is was .....)...

To my first point ... I guess I was trying to say that for such a small figure it would getrather messy after three or so years :

25 % of 50 leaves you with 7.5

25 % of 37.5 leaves you with 28.125

and so on ...

mark

[Flubflow]

What you do with capital eqiupment in terms of calculations is pool it.
i.e. you will list the individual capital items purchased that year but all your reducing balance calculations are done on the total of the purchases less disposals rather than on individual items.
However, it does make it slightly more awkward when you have different % rules for different types of equipment but the subsequent 25% WDA (writing down allowance) after the first year means you can group them with all the other normal 25% capital "plant & machinery".

[goldoni]

I don’t know about other accountants, but if I purchase any computer parts or electrical meters they are written off in that year 100% and I have been investigated and nothing was said about the amount claimed for computer equipment claimed. Van, cars, plant and tools are reduced by a % each year until you have no more to claim.

[markmarkymark]

thanks Flub .... for clarification !!

Goldoni - you are right, but I think the 100% allowance for computers / IT in the first year has ended ,,,,

cheers

Mark

[iadom]

Originally Posted by goldoni

I don’t know about other accountants, but if I purchase any computer parts or electrical meters they are written off in that year 100% and I have been investigated and nothing was said about the amount claimed for computer equipment claimed. Van, cars, plant and tools are reduced by a % each year until you have no more to claim.

Exactly the same with me, only full PC systems stay on the books for longer than 12 months, although my accountant used to keep my answerphones on a depreciation basis, but as they cost £25 to £50 it is not worth the hassle. Some of the software I have to purchase for my business is near to £100 but is fully claimed for in the 12 month period.
All things such as modems, drives etc are treated in this way as well.

[SMHarman]

You can set yourself an accounting policy that any item under say £200 is an expense, not capital and thus written off in its entirity in yr 1. That would solve the accounting mess on the answerphones.
IT no longer has 100% IA as already noted.

[markmarkymark]

SMHarman...

interesting - would that in your view then extend to a mobile phone that cost £99.99 for example. I had thought of putting that down as a Capital cost - but phones are almost expendable items like paper nowadays???.

cheers

Mark

[SMHarman]

As Idiom said... You can run questions like this past the IR, they give you an answer reference in case in future your return is queried on these matters