Moving/Doing Up Home Office, Expenses Questions

[MikhailCompo]

I was more on the point the thinking around him saying he's moving off FRS so can claim VAT so it's a significant saving. You meant the same?

I have to spend over 2k to get VAT back on FRS. Moving off FRS means I am saving 20% of each purchase compared to buying the privately.

20% is a significant saving in my view.

That's where I am coming from.

[TheCyclingProgrammer]

1) You would be hard pushed to claim furniture in the house (mind you I've never tried to).

Nothing wrong with buying office furniture/equipment through the business, especially if you work from home a lot.

[TheCyclingProgrammer]

If the use of the printer, scanner or desk is more than incidental then there is a chance that HMRC would argue that the items have a duality of purpose.

It depends on your definition of "incidental". The actual HMRC guidance uses the term "not significant" and the emphasis is on the purpose for buying the equipment in the first place, not how it is actually used. It is possible to have a piece of equipment that is used as much for non-business related stuff as business-related and the non-business related stuff still be "not significant" if you needed the equipment to do your job.

For example, most IT contractors have a legitimate need for a laptop or computer to do their work. No matter how much you use your laptop for personal stuff, the fact that you couldn't do your job without it makes the purchase "wholly and exclusively for business purposes" and any other use not significant.

At the end of the day, I can't see HMRC raising any queries about things like a desk, a printer, and a filing cabinet, especially if you work from home. If you hardly work from home then I suppose they could raise a few eyebrows but there are bigger fish to fry...

[TheCyclingProgrammer]

Yep but I was also thinking of the small saving you make by paying for it before corp tax.

And also the saving of any income tax if you buy it personally from post-tax income.

[TheCyclingProgrammer]

I have to spend over 2k to get VAT back on FRS. Moving off FRS means I am saving 20% of each purchase compared to buying the privately.

20% is a significant saving in my view.

That's where I am coming from.

Sort of, but not quite. What you have to remember is that on the FRS, you are still effectively getting the VAT back on your purchases, just indirectly...the difference between the VAT you charge and the VAT you pay on the FRS is intended to cover any VAT you've paid over the year. So long as this surplus amount exceeds your inputs, you've reclaimed all of your VAT (and probably made a small profit). Where the FRS doesn't work is if your inputs exceed your FRS surplus.

On the standard scheme you are guaranteed 100% recovery of the input VAT but you'll never profit from it like you often do on the FRS. You won't be better off though than you were before though (you will be better off compared to the new low cost flat rate mind you).

[MikhailCompo]

Sort of, but not quite. What you have to remember is that on the FRS, you are still effectively getting the VAT back on your purchases, just indirectly...the difference between the VAT you charge and the VAT you pay on the FRS is intended to cover any VAT you've paid over the year. So long as this surplus amount exceeds your inputs, you've reclaimed all of your VAT (and probably made a small profit). Where the FRS doesn't work is if your inputs exceed your FRS surplus.

On the standard scheme you are guaranteed 100% recovery of the input VAT but you'll never profit from it like you often do on the FRS. You won't be better off though than you were before though (you will be better off compared to the new low cost flat rate mind you).

Thanks, this is really well explained I think.

If you take into account that I need to make some asset purchases, i think my VAT spend would exceed my VAT FRS income. I would make the purchases privately if i had to, however I was looking at trying to buy them all from one seller to make them over £2k and I would end up spending more than i could from multiple sellers, so I do stand to benefit overall from the move.

[d000hg]

Sorry to jump in slightly off-topic, but does capital expenditure (if I have the right term) count towards your eligibility for the better FRS rate? e.g. if 2017 is the year I was planning to refresh my kit could that keep me on FRS for one more year before bailing to regular VAT?

[MikhailCompo]

does capital expenditure (if I have the right term) count towards your eligibility for the better FRS rate?

I don't know what you mean by this? What better FRS rate? You get an additional 1% for your first year of trading, but the % various depending on your business area e.g IT is 14.5% or 13.5% first year. Is that what you mean?

[radish2008]

What does your accountant say?
2) No- the contract needs to be explicitly in your company's name

No it doesn't. I have been informed by my accountant that a personal contract can be claimed as an expense and as a business phone.

HMRC will never split business and personal use on someone's phone bills when most contracts are all inclusive of minutes and rentals are low was the rationale.

[d000hg]

I don't know what you mean by this? What better FRS rate? You get an additional 1% for your first year of trading, but the % various depending on your business area e.g IT is 14.5% or 13.5% first year. Is that what you mean?

I mean the existing FRS rate (14.5%) rather than the rubbish 16.5% thing.