Expenses on tax return

[IanIan]

Hi there,

I consider myself a self employed computer programmer.

Last year I got a contract position but because I do not own a limited company, I had to become an employee of the agency that was arranging the job.

Whilst doing the work I wanted to do some of it at home so I had to buy some software in order to be able to do this.

So the question is, was this software an expense that I can put down on the self emplyment section of the tax return?

It seems to me that the structure of the tax return doesn't accomodate very well a self employed person who is forced to work as a temporary employee.

Cheers, Ian.

[Lucifer Box]

I'm afraid that what you "consider yourself" has no bearing on the matter. If you registered with your local tax office as a sole trader / self employed person only then can you fill in the self employment section. If you did not, you cannot. If you have been operating as self employed and did not notify your local tax office within 3 months of you starting up, there will be a fine to pay.

If you were an employee (which it seems you were) and the expense was incurred wholly and necessarily as part of your employment, then it should be claimed as an employment type expense, the same as any other employee would.

[xoggoth]

I believe that software, provided it is new and not an upgrade, is actually classed as capital. That being so, you can claim it via the personal capital allowances system, you need to fill in a form you will find on the IR website.

PS Darn complicated that form though. Unless amount is huge I would just be inclined to stick it in on necessary expenses on tax form. Unless huge, doubt they will query it.

[Lucifer Box]

That has the ring of truth about it. I think the write off is 50% in the first year now. Xog is correct though that the capital allowances section is quite complex and unless we are talking serious wonga just do as originally suggested and stick it down as an employee type expense.

[IanIan]

Oh yes I am registered as self employed and I have used the software to do other contracts where I wasn't an employee at all.

Also, I don't want to be filling in a tax return in the hope that it won't be queried. I want to be filling it in under the assumption that if it was checked then it would all be in order.

I spoke to the IR help desk and they said that employee expenses needed to be arranged with the employer which suggests to me that you can't just tack it on to the form at the end of the year.

[Lucifer Box]

How much money are we talking about here?

[IanIan]

Only £88. But surely that shouldn't make a difference as to where it should go?

I've just never had self employed expenses before and it seems unfair that, because one has been forced into being an employee even though one is really a contractor, that claiming expenses is made more difficult.

[malvolio]

No it's not. You are an employee of the agency, whether you wanted to be or not, so you should be claiming the cost from them. You have to think of it in terms of legal entities, and there isn't one for this particualr client other than the agency. So charge them for it.

But then again, arguably you shouldn't be using software bought for use on their work for other people either, you should have bought another set. Which is another reason to write it off and stop worrying about trivia.

[IanIan]

Why is this trivial? Next time there could be alot more money at stake. Surely its a good idea to get these issues sorted out when the consequences aren't too big?

But otherwise thanks for your reply. It made good sense.

[malvolio]

Only "trivial" in terms of money gained agaisnt effort expended. I think you need to sort out some sort of official presence, either as a Sole Trader or a LtdCo so you have something firm to work with in future.

Or next time think about using a brolly, this is about the only situation in which they make commercial sense