Stupid Question time...

[Vito]

If I buy a Laptop on expenses (purely for work use) then presumably this should then be listed on the company asset register?

More importantly, how is this treated for tax purposes...presumably, as the Laptop is an asset it should be added on to the cash profit for the year for tax purposes?

So...Total annual profit before buying Laptop = £100k

Laptop cost £1k

So cash profit is £99k

Does corp tax get paid on £100k or £99k?

[malvolio]

Corporation tax is paid on profits. Profit is VAT-exclusive gross income less expenses and operating costs.

So - what's the answer?

[Kyajae]

If I buy a Laptop on expenses (purely for work use) then presumably this should then be listed on the company asset register?

More importantly, how is this treated for tax purposes...presumably, as the Laptop is an asset it should be added on to the cash profit for the year for tax purposes?

So...Total annual profit before buying Laptop = £100k

Laptop cost £1k

So cash profit is £99k

Does corp tax get paid on £100k or £99k?

The laptop goes on the company's balance sheet and remains the property of the customer until the company is wound up. You can offset depreciation against profits, you'd need to see your accountant.

[Vito]

Ha ha....it's been a while since someone rattled your cage Mal...good to see you back at your best!!

It all depends on whether 'expenses' covers CapEx as well as OpEx?

[malvolio]

It does. You buy the laptop out of gross, not out of profits. Hence, in your example, CT is against £99k.

The value of the latop depreciates over time, and you get further CT relief on that reducing value. I leave that level of detail to the accountant though.

[Vito]

It does. You buy the laptop out of gross, not out of profits. Hence, in your example, CT is against £99k.

The value of the latop depreciates over time, and you get further CT relief on that reducing value. I leave that level of detail to the accountant though.

I guess this was my question really...if a Laptop costs £1k then in real terms it only costs £800 (because of the CT factor)...but then if we assume that it depreciates over a period of 3 years and this is a line entry on the P & L, then in truth the Laptop will only cost £600 because the depreciation will be taken off the profits as well...

This seems too good to be true...so I must be getting something wrong...

I will leave it all to my accountant but it seemed like one of those silly questions that actually quite a lot of folk on here might be interested in....

[ASB]

The laptop is a capital item. Thus this makes no difference to the P+L. You will pay CT on £100k.

Actually you won't quite.

There will be an asset account for the laptop and a depreciation account for it. I think you can currently claim 50% first year cap allowances. Thus there is chargeable depreciation of £500, this is written back to the P+L as an expense meaning your profit will in fact reduce to 99,500.

However, the water can get a bit muddied if different rates of depreciation are used for accounting purposes than are chargeable.

This is just what Kyajae said, but in more words

[opc]

I guess this was my question really...if a Laptop costs £1k then in real terms it only costs £800 (because of the CT factor)...but then if we assume that it depreciates over a period of 3 years and this is a line entry on the P & L, then in truth the Laptop will only cost £600 because the depreciation will be taken off the profits as well...

This seems too good to be true...so I must be getting something wrong...

I will leave it all to my accountant but it seemed like one of those silly questions that actually quite a lot of folk on here might be interested in....

This is the company's laptop for business use, not your personal laptop so comparisons to what it might cost you personally to buy it out of your personal income are irrelevant. It costs the company £1000.