Flat rate vat and Capital assets

[mark271]

Hello,

I have joined the flat rate vat but would like to buy a laptop. For me to be able to claim the VAT back for the laptop I need to spend over £2k. My question is does the laptop have to cost 2k or can I buy a laptop and a screen for a total of 2k both would be on the same invoice.

Thanks

[dude69]

single asset.

If you want, you can ask the store to put the laptop down as £2k, and the screen as free with the laptop.

[malvolio]

So let me get this straight. You're going to spend £2000 on a laptop you could almost certainly get for £700 in order to save some of the VAT element of the £700 one. Or you're spending £1300 to save £28...

Haven't really got the hang of this economics lark, have you?

[Sausage Surprise]

Why not just put it through as a business expense?

[mark271]

I was planning on spending about 1.3k to 1.5k on a laptop of which I would not be able to claim vat back under the flat rate scheme. I also wanted a monitor 30" dell so both together come to around 2k. So if I cant get the screen I may as well spend about 500 more and get 300 back. Please can you tell me where I can get a 2k spec laptop for £700 and I will buy it tomorrow. I will also be putting it through as a business expense.

MArk

[Ardesco]

What sort of spec laptop are you looking for? One man's £2k could quite easily be another mans £700... (depends if you go into PC World or not....)

[malvolio]

Still don't get it, do you.

Small detail first, it's not a business expense, YouCo should be buying the thing for itself.

Secondly, is £1300 gross or net of VAT? If the latter the actual cost is £1106 and the VAT element is £194, otherwise it's £227.50. Assuming lowinsh average earnings for a year under FRS, you will have charged around £13k VAT and reclaimed £9870, gaining £3130 less CT, or £2586. With your laptop purchase included that drops to £2903 less CT or £2400. So there's a net reduction in net profit of £186. To avoid that £186 loss, you are thinking of spending £700 more than you need to. So I remain confused as to the logic.

Finally the Single Item rule is there for a purpose - explicitly to stop people aggregating purchases to avoid returning VAT legitimately owed.

Still, it's your money and your company.

[ASB]

I will also be putting it through as a business expense.

It's not an expense. Capital purchases are different.

An expense reduces profit by 100% at the point it is acquired (i.e. it has not residual value).

The laptop is depreciated at a rate set out by your accounting policies (which could be 100%). However relief (i.e. the amount which can be offset against taxable profit) is set by HMCR (this varies according to the mood of the government). When the laptop is finally sold or written off then relief is available for it's actual residual value cf its depreciated value.

[dude69]

It's not an expense. Capital purchases are different.

An expense reduces profit by 100% at the point it is acquired (i.e. it has not residual value).

The laptop is depreciated at a rate set out by your accounting policies (which could be 100%). However relief (i.e. the amount which can be offset against taxable profit) is set by HMCR (this varies according to the mood of the government). When the laptop is finally sold or written off then relief is available for it's actual residual value cf its depreciated value.

This all changes on in 3 days, and you can reduce profit by 100% on the day it is acquired, although, as you say, this is through the provision of a 100% capital allowance, rather than being an expense per se.

[Robot]

FLAT RATE SCHEME FOR SMALL BUSINESSES

15.3 What counts as a single purchase of capital goods

A computer Package (Computer, printer, camera etc) bought as one package is one purchase of capital expenditure goods. If the package costs £2K or more (incl. VAT) then input tax can be claimed.....