Reply to: Claiming Expenses Prior to Ltd Formation

[lnoton]

Thanks for the replies.

Interesting indeed.

P

What did you do in the end? Im thinking the same, i have a MBP 2.33 C2D 2GB that i would like to sell to my company.

Who is your accountant?

[Peter Loew]

Thanks for the replies.

Interesting indeed.

P

[dude69]

Any asset you use for personal AND business use needs to be apportioned according to business/personal use upon which you can legitimately claim tax relief on the business element.

It seems it is actually ok.

For IT consultants, computer equipment can be seen to provide both a personal and a business use.

HMRC say, that if there is no 'significant personal use', then there is no BIK.

http://www.hmrc.gov.uk/manuals/eimanual/eim21613.htm

'For example, where a computer is provided by an employer because it is necessary for an employee to be able to carry out the duties of the employment either at home, or whilst travelling or at work, it is highly unlikely that any private use made of that equipment will be significant when compared with the business need for providing the computer in the first place. In these circumstances section 316 will apply and no tax charge will arise.'

In other words even though you might use your business PC 12 hours a day for personal use, the somewhat unquantifiable business benefit of you having a PC to do business work on, it is far higher than the actual monetary cost of providing the asset to you, and accordingly relative to the VALUE of the business use, the personal use is insignificant.

So you just need to show that the business needs the equipment, not that you don't use it for personal use......

Apologies for my confusion.

[[email protected]]

Any asset you use for personal AND business use needs to be apportioned according to business/personal use upon which you can legitimately claim tax relief on the business element.

[dude69]

I see. But I find it equally conspicuous even if you bought a laptop brand new on the business.

Why would a tax inspector find it more believable that I'd not use it for personal use in this case?

P

Because you would say I already had one before, but that is mine, and I have bought a new one for company use. That way you have one for personal use and one for company use and you can quite reasonably argue that you are gaining no personal benefit from the company asset - you use the personal laptop for personal use, looking at websites, and the company one for business use.

I could quite easily buy a laptop for business use, e.g., on client site, where my personal laptop (owned by me) might not be appropriate because of dubious content, mp3s, etc. on it.

If you sell your OWN personal asset to the company it is not in the least bit plausible to claim that you are not getting any personal benefit from it.

And it of course worse to sell your own asset and then pay BIK tax on it than to do the same on a new one, because the deemed BIK would be based on new value, and the tax saving would be tiny based on lower second-hand value, and input VAT would not be reclaimable.

[Peter Loew]

Yes, but any tax inspector would find it impossible to believe that you would not continue to use it for personal use (unless you buy another one with your own money, which, from a tax point of view, makes no sense), and therefore you should declare it on your P11D and pay personal income tax on 20% of the original price.

So not worth doing, unless you either want to

(a) pay personal income tax on the value of the laptop OR
(b) commit tax fraud and not declare it on the P11D and risk penalties and back taxes

I see. But I find it equally conspicuous even if you bought a laptop brand new on the business.

Why would a tax inspector find it more believable that I'd not use it for personal use in this case?

P

[r0bly0ns]

during that time incurred legitimate business expenses that I could not claim under Giant (Laptop, etc.)

Spoke to the accountant. I can invoice my company for the current 2nd hand market value of the laptop.

Luckily, Apple Macs don't really go down in value that much

As you have purchased the laptop as a business expense, you should put it through the business as a business purchase from new rather than selling it second hand to the business, if you can.

As per the issues above, it's more personal income you have to report on your self assesment......

[BrowneIssue]

Sounds to me like you didn't put their purchase through as expenses, but instead sold them to the company...

I did both. Things for which I had a receipt were my first expenses, those without were lumped together as a purchase.

I didn't do a very good job of reading the question.

[dude69]

Spoke to the accountant. I can invoice my company for the current 2nd hand market value of the laptop.

Yes, but any tax inspector would find it impossible to believe that you would not continue to use it for personal use (unless you buy another one with your own money, which, from a tax point of view, makes no sense), and therefore you should declare it on your P11D and pay personal income tax on 20% of the original price.

So not worth doing, unless you either want to

(a) pay personal income tax on the value of the laptop OR
(b) commit tax fraud and not declare it on the P11D and risk penalties and back taxes

[Peter Loew]

Spoke to the accountant. I can invoice my company for the current 2nd hand market value of the laptop.

Luckily, Apple Macs don't really go down in value that much

[dude69]

Sounds to me like you didn't put their purchase through as expenses, but instead sold them to the company.

There is a subtle difference (isn't there always with hector!), especially if you are reclaiming VAT.

It ain't that subtle.

Basically one is 'You are planning to set up a company, and need to have certain business tools/assets for that company.' The assets are purchased by you for the purpose of that company. This is a pre-registration expense. You have to have bought it with the company in mind. The maximum period is six months before registration.

The nice thing with this is you can reclaim input VAT on pre-reg expenses, even if you go on to Flat-Rate scheme on Day 1.

The other is 'You personally own some tools that you bought purely for your own use, but you now find would be useful for the company'. You sell them to the company at a reasonable second-hand value. (But be aware BIK is surely impied in this scenario if the assets are at your disposal given that they were yours previously, you must have wanted it. Since the 2006 budget, there is no longer ANY allowance for computers for or partly for private use.) http://www.hmrc.gov.uk/budget2006/bn30.htm

I do not see how you can reasonably sell your business your home PC (pre-reg purchase is quite different) and then not declare it as a Benefit-In-Kind on your P11D. Of course the BIK tax would far exceed any gain made by selling your PC for £200.

Much better to retain your home PC for your own use (which can be a 10-year-old brick), and have a whizzbang flashy one owned by the company declared purely for corporate use.

[r0bly0ns]

I got told that I could claim for things I had owned for years, such as a desk, office chair, bookcase, typewriter, stationery and other bits (that, 12 years later, the company still owns). I had no receipts for them, they got bundled together into a list with a guesstimate of a 2nd hand value and the company bought the lot off me.

Sounds to me like you didn't put their purchase through as expenses, but instead sold them to the company.

There is a subtle difference (isn't there always with hector!), especially if you are reclaiming VAT.


I have been advised by our accountant that you can do either, as long as:

i) If putting through new purchases before company formation as company expenses, they must have been made within a certain time frame of the comapny being formed, the HMRC website will have details.

ii) If selling personally owned items to the comapny, they must be sold at a 'reasonable' 2nd hand value.

[Peter Loew]

Brilliant. Going to get in touch with the old accountant and make some claims!

P

[[email protected]]

The 6 month rule applies to claiming vat. Anything purchased that the company still has in its possession, the company can reclaim input vat up to 6 months prior to vat registration.

[BrowneIssue]

Yes. Depends on the length before the company was set up. My accountant mentioned 6 months to me.

Ask yours.

I got told that I could claim for things I had owned for years, such as a desk, office chair, bookcase, typewriter, stationery and other bits (that, 12 years later, the company still owns). I had no receipts for them, they got bundled together into a list with a guesstimate of a 2nd hand value and the company bought the lot off me.