Reply to: Second Laptop Expense

[d000hg]

It could come to bite me, but I honestly tend not to worry too much about IT Purchases. To be frank, unless it's blatantly personal use (I.e., TV's and such), pretty much anything computery goes via my Ltd.

In reality I do this too though I don't take the pee. There's what you can get away with, what you genuinely buy for use at work, and what HMRC will deem acceptable in an investigation... those probably don't overlap as common sense might dictate e.g. there's stuff you could claim but would feel was daft, and stuff HMRC might balk at which you would argue.

[TheCyclingProgrammer]

^ (Almost) exactly this happened to me.

And me, although in my case it was due to software error. When you're on the FRS you're not supposed to include out of scope supplies (e.g. services to outside the UK) within your flat rate turnover and therefore they shouldn't even go in box 6 of your VAT return. FreeAgent - many years ago now - used to include out of scope supplies in box 6 meaning that the value didn't tally up with the amount of VAT you were declaring and it triggered an enquiry for me. Panned out largely as Maslins said, FreeAgent have since fixed this. This was about 7 years ago mind you.

[Platypus]

2) VAT - often for those clients with mainly overseas sales. I imagine HMRC get concerned at seeing accounts showing £100k sales for the year, and VAT returns showing £nil/negligible VATable sales each quarter. So they query the VAT returns, client shows them sales are to overseas, they say fine and move on.

^ (Almost) exactly this happened to me.

[DeludedKitten]

It could come to bite me, but I honestly tend not to worry too much about IT Purchases. To be frank, unless it's blatantly personal use (I.e., TV's and such), pretty much anything computery goes via my Ltd.

This.

My company has at least three laptops that I can think of, plus a Chromebook. Two desktop machines, multiple monitors. Some get used more than others, some never get used these days but I haven't got round to scrapping them.

I bought a nice new laptop this month from PC specialist because my main one is too big and heavy to be lugging around when I have to travel to client site. I have no qualms about expensing IT equipment that the business needs, ever.

[Maslins]

I've heard both. No idea which is "more true".

From the limited number of enquiries we've had, HMRC seem more relaxed than perhaps some people fear. They're not overly bothered about someone incorrectly claiming a £100 expense that wasn't completely. They're bothered about the big losses, and the very easy ones.

Two main types of enquiries/checks we see are:
1) self assessment - HMRC know from some other source that there's a relevant thing not declared. Could be client forgetting they had a student loan, or got child benefit when they earn >£50k, or to give details of a P11D.

Virtually always for these HMRC are correct, client says oops, normally no penalty levied.

2) VAT - often for those clients with mainly overseas sales. I imagine HMRC get concerned at seeing accounts showing £100k sales for the year, and VAT returns showing £nil/negligible VATable sales each quarter. So they query the VAT returns, client shows them sales are to overseas, they say fine and move on.

[northernladuk]

The above is kind of the opposite I was told by someone running a small book keeping business.

It was explained to me that they apply a level of diligence to find your intentions first. They aren't initially looking to go through every transaction. Just enough to check you are running your business properly. When looking at expenses banging a big bag of receipts on the table is usually enough to move on to the next thing for example.
It's not cost effective to look for the odd item. If they do spot something that might indicate you aren't following the rules properly or have been negligent/fraudulent they'll pull on the gloves and open the lube.

I'd imagine from that leaving something in is more likely go peak his interest and he'd take a lot more interest in the rest, not the other way around.

Dunno if that's true either but makes more sense to me.

[Platypus]

That's a good question and to be fair I don't know. It's just my style to present the super clean response to a newbie so they understand what they are asking.

This reminds me of something I was told a few years ago by a very seasoned guy who did a mix of contracting, and trade and retail sales in the IT industry. He advised to always leave something in the books for the Tax Man to find.

His reasoning was: The tax man's job is to come in and dig and dig to find something. He justifies his existence by finding problems, finding a bit of tax that needs to be paid. This is his job. So leave something in the books that's not sticking out like a sore thumb, but isn't hidden too deeply. When he finds this, he'll be pleased. Mission accomplished. You thank him profusely for his help finding this genuine error/oversight and you apologise profusely while you write the cheque. He goes away happy. You breathe a sigh of relief. Job done. Everyone is happy.

But if you leave him nothing to find, he just keeps on digging, and that's the last thing most small businesses want or need!

You can take this advice or leave it, but this seemed the right thread to pass it on.

[chopper]

The first thing I did when I went contracting was buy two laptops. One is a 13" MacBook Pro, one is a larger 17" Windows device. If nothing else, I need the Windows device for running Visio, and sometimes I find the larger screen better for some types of things I need to do. I'd have no problem justifying either.

Provided you have a legitimate need for 2 and can justify it, then great.

[Batcher]

I have a similar approach. I don't take the piss, but if the hardware has a business purpose or its for the office (which is a separate garden office) then it goes through the business. If I couldn't justify it at all then it doesn't.

During my IR35 investigation, HMRC actually queried if I needed the 1 laptop I had to run the business. Yes, emails and Jobserve were a thing back in those days

I now have a Macbook Pro 13", iMac 27" and iPad Pro 12" in the business and they all get used depending which one is best for the circumstances.

[Platypus]

Having one "as a spare" - well it just seems an odd thing to do. Is it really for this purpose or will you be letting your spouse/kid use it unless you need it?

As it happens, I do have spare laptops, desktops, phones and screens. They are genuinely used for business, and they have saved my arse when things break/go wrong, but truth is they are not very often needed, much like any backup. But when they are needed, boy have I been glad to have them! And no, they are not used by the rest of the family in the meantime! And look, no winky winky smiley either.

Truthfully I'm amazed by anyone who doesn't have a spare. I've seen colleagues be out of action for a week while they order, receive, install and configure a new machine cos the old one won't boot.

[d000hg]

I think you can absolutely justify numerous laptops if they are used for testing - different specs, etc.

Having one "as a spare" - well it just seems an odd thing to do. Is it really for this purpose or will you be letting your spouse/kid use it unless you need it?

[Maslins]

In terms of what would likely happen, it really does depend on the level of p!ss being taken. As others have said the chances of it being looked at are small, but for the sake of the below, let's imagine HMRC do take a close look.

If you've got a second laptop, and after a bit of discussion it seems clear business usage is negligible, but perhaps you can justify at the time of purchase you thought it would be used more for business, and otherwise things all look fairly clean (ie no other significant questionable claims), then the cost would likely be disallowed and nothing further.

It is likely that if one questionable thing is quickly found, HMRC would ask for a breakdown of some of the other cost codes in the accounts, or look into previous years, see if there are other questionable things. If you've bought 5 computers, and on closer inspection one lives in your best mate's house, one in your mum's house, and a couple more may be at your home but mainly have CBeebies/whatever installed rather than any work apps...then it would seem clear this wasn't an innocent mistake.

Where it goes beyond questionable, and into downright taking the Michael, then penalties would likely be levied on top of the cost being disallowed. Penalty regime is as below:
- if a penalty arises because of a lack of reasonable care, the penalty will be between 0% and 30% of the extra tax due
- if the error is deliberate, the penalty will be between 20 and 70% of the extra tax due
- if the error is deliberate and concealed, the penalty will be between 30 and 100% of the extra tax due

[northernladuk]

I know you're super-cautious about this kind of thing NLUK.... so I'm curious to know what you think is the WORST thing that could happen if HMRC judged that the 2nd laptop to be not allowable?

I doubt it would be much worse than, "oh dear, it's not allowable? I'm sorry, how much extra tax do I owe because of this oversight? Hum, ok, let's treat the laptop as £1000 of additional income on which I should have paid tax and NI. Here's a cheque for £250, thanks for the advice, bye!"

That's a good question and to be fair I don't know. It's just my style to present the super clean response to a newbie so they understand what they are asking. I know plenty of others will come on and say JFDI so I know the OP will get a balanced view from us.

All I want to do is get the OP to think about what he is doing and try stave off getting in to the habit of trying to justify a 75" TV and ipads for the kids as business expenses. Once they understand the potential risks and have a clear view on it then they are free to do what they want. I don't think I've ever said don't do it outright, just make them think about it.

Not sure that is the worst than can happen. A full blown investigation could come out and if the OP has gotten in to the habit of screwing his company it could be a bigger problem. If he's thought about it and thinks he has genuine justification then fine, go with it.

[pscont]

I know you're super-cautious about this kind of thing NLUK.... so I'm curious to know what you think is the WORST thing that could happen if HMRC judged that the 2nd laptop to be not allowable?

I doubt it would be much worse than, "oh dear, it's not allowable? I'm sorry, how much extra tax do I owe because of this oversight? Hum, ok, let's treat the laptop as £1000 of additional income on which I should have paid tax and NI. Here's a cheque for £250, thanks for the advice, bye!"

This. £250+penalty. Not the end of the world in the VERY unlikely event of them checking.
But I also buy anything IT via TLD.
It saved me many times, especially when working 800 km away from the client and win10 upgrade screws up the certificates on my main laptop so I can not connect to client's VPN. This is when second laptop is handy.

[gables]

I know you're super-cautious about this kind of thing NLUK.... so I'm curious to know what you think is the WORST thing that could happen if HMRC judged that the 2nd laptop to be not allowable?

I doubt it would be much worse than, "oh dear, it's not allowable? I'm sorry, how much extra tax do I owe because of this oversight? Hum, ok, let's treat the laptop as £1000 of additional income on which I should have paid tax and NI. Here's a cheque for £250, thanks for the advice, bye!"

The only thing I can think of is more of a question, and that is 'would something like this trigger an IR35 investigation?'

Having said\asked that, I'm with the others in that anything remotely IT related goes through the ltd.