Reply to: Real cost of new equipment?

[northernladuk]

NLUK,

I also charge for a fraction of the house.

For as long as I have been contracting, I have always had one room as an office, usually the 2nd largest bedroom. A corresponding fraction of the leccy and gas for the entire house then gets charged to expenses. (E.g. 4 beds + 1 reception = 5 rooms = 20% of the bills.)

Once upon a time I even charged 20% of the rent too.

That room has 2 desks, PCs, server, printers, fax machine, bookcases, filing cabinet, office chairs, and is indisputably an office.

My most recent accountant said I ought to only charge £2 per week as per HMRC's rules because "I would get away with that". But that was because he flatly refused to believe any contractor actually uses a room as an office; but then I now know he's a useless ****** anyway.

Link to HMRC site.

An interpretation of the HMRC page.

Nice post, the HMRC link gives some good examples so I guess the answer will be different for us all depending on personal situations. Will go digest.

[Scrag Meister]

Brought one of these Z5500 setups some years ago, they rock. You can really hear the c# coming through that big sub. Recommended.

I know, already have one set in the lounge, now to update the ancient Cambridge Soundworks ones I currently have in the office.

[Wanderer]

Z5500 speakers for watching c# tutorial videos online.

Brought one of these Z5500 setups some years ago, they rock. You can really hear the c# coming through that big sub. Recommended.

[Scrag Meister]

Am planning to buy a business desktop in the next few months, never bought a business one before.

Word really needs a couple of 24" monitors (poss 1 30" instead) and a high-end graphics card NVidia 470, dev work benefits here too.
Couple of striped SSD to boot from and a fast secondary drive.
Fast processor for large db work, Intel or AMD not sure yet.
Lots of memory, 6Gb min
Logitech G19 keyboard for invoicing
Z5500 speakers for watching c# tutorial videos online.
A decent mirrored-striped NAS so my accounts are safe, sit on a shelf and straight into the router.

I won't have a problem reaching £2k and it'll be money well spent.

[XLMonkey]

AFAIK it doesn't have to be a single item that is over £2000, but the total invoice amount to be able to claim the VAT back.

I'm sure someone will correct me if I'm wrong.

You are right. Provided the invoice totals £2000 or more, and the items on it are related, then you can reclaim the VAT even if you are on the flat rate VAT scheme. So, you could add a back, peripherals, printer etc all together onto a single order in order to get over the £2000 limit.

Still means you're spending a truckload of cash though, so it might be a good idea to make sure you really really need it.

[RichardCranium]

NLUK,

I also charge for a fraction of the house.

For as long as I have been contracting, I have always had one room as an office, usually the 2nd largest bedroom. A corresponding fraction of the leccy and gas for the entire house then gets charged to expenses. (E.g. 4 beds + 1 reception = 5 rooms = 20% of the bills.)

Once upon a time I even charged 20% of the rent too.

That room has 2 desks, PCs, server, printers, fax machine, bookcases, filing cabinet, office chairs, and is indisputably an office.

My most recent accountant said I ought to only charge £2 per week as per HMRC's rules because "I would get away with that". But that was because he flatly refused to believe any contractor actually uses a room as an office; but then I now know he's a useless ****** anyway.

Link to HMRC site.

An interpretation of the HMRC page.

[northernladuk]

If it has all your business stuff in there then would you use it as a guest bedroom or a play room for the kids? What if you got called out in the middle of the night, would you expect ot be able to use it as an office or would there be someone sleeping in there?

If it's only used for business then it's 100% business use in my opinion, regardless of how many of few hours it's used for because it's not available for other uses...

But what is it when you take your business stuff out? It is a room in a house. I would equate it to your car. It is your personal car unless you do business miles in it. It is a tool to business with just like the room in your house is. You don't have a room that does nothing but is soley there for business.

[Wanderer]

But if it available for use as a room in your house 24 hours and you use it for 8 hours as business then it is 1/3. It still exists the rest of the time and has to be classified for use even if you aren't using it surely?

If it has all your business stuff in there then would you use it as a guest bedroom or a play room for the kids? What if you got called out in the middle of the night, would you expect ot be able to use it as an office or would there be someone sleeping in there?

If it's only used for business then it's 100% business use in my opinion, regardless of how many of few hours it's used for because it's not available for other uses...

[northernladuk]

I'd say that if you only use the room for business use then it's 100% business.

If you spend 2 hours in the evening surfing the web and 8 hours working then that's 80% business use, innit.

But if it available for use as a room in your house 24 hours and you use it for 8 hours as business then it is 1/3. It still exists the rest of the time and has to be classified for use even if you aren't using it surely?

Business don't get to claim 2/3 off as the premises is still available for business use. The fact no one is in it is neither here nor there. I would say you have to classify the room and then calculate the hours using it as business. The fact it is attached to your house makes it personal until you do business in it. You can't say just because it isn't being used for something else it doesn't exist.
You have a company car, it is still a company car when it is on your drive being nothing more than a hunk of metal on rubber.
If you have a personal car it is a personal car until you use it for business etc etc

[Wanderer]

I'm a bit confused by the proportion of time a room is used for business use. One of those examples seems to claim taking a fraction of 24 hours, so even a full 8-hour day is only 1/3. But that's kind of dumb if you don't use the room for anything else... businesses don't get to claim 2/3 discount for not being open 24 hours.

I'd say that if you only use the room for business use then it's 100% business.

If you spend 2 hours in the evening surfing the web and 8 hours working then that's 80% business use, innit.

[Mr.Whippy]

I'd be interest in seeing the specification of a £2000 PC.

AFAIK it doesn't have to be a single item that is over £2000, but the total invoice amount to be able to claim the VAT back.

I'm sure someone will correct me if I'm wrong.

[Clare@InTouch]

You need only look at Apple for something in that range!

Mac Pro - Apple Store (UK)



Nice.

[IR35 Avoider]

I'd be interest in seeing the specification of a £2000 PC. Does it have a 60" 3D flat screen TV as a display?

Given I already have a monitor, case, keyboard etc, my guess is a new computer would cost me somewhere between £250 and £400, depending on the options. (I have just put together a Windows 7 HTPC, with wireless keyboard, remote and external optical drive for £380, display excluded.)

[THEPUMA]

No.

£2000 spend is £1702 + £298 VAT. You can claim back the £298

Then reduce Myco profits by £1702. 21% of £1702 is £357, so cost is £1344 (if you want to look at it that way)

Assets will then depreciate but you don't need to worry about that.

If you wish to make the best of equipment, purchase it through your MyCo. Printer paper, stationary, books, pen drives, storage, mobile phones, renting your own office space from yourself at home are all legitimate expenses.

Plus there is a personal tax saving when you come to extract the £1344 from the company. Assuming there is no cost of extracting the computer, which in practise there is unlikely to be.

[d000hg]

Agreed but the office space is one for debate. Yes you can claim it but how much seems to be a difficult one. I know people at my gig blatently taking the piss and charging everything as a percentage of the size of house. Gas, electric water etc but they don't work there full time. My last two accountants have advised some measly figure like £260 odd a year or something. I don't work from home as my main base it has to be said.

There are two figures I've come across.

On the one hand I saw somewhere on HMRC, a formula which was basically:
total costs * (office floorspace / total floorspace) * (fraction of time used for business use)
This gives me about £100/month since I work full-time from home.

On the other hand a typical tiny figure of £4/month or similar is often mentioned as a guideline for those running a home office but working on site full-time.

It's a big difference obviously... I think if you don't work at home you'd want to be careful as it has a bad smell, easy to portray it like MPs' expenses scandal. Claiming you maintain an office to do your accounts and then claiming for a load of stuff you use a few minutes a month is a bit dodgy.

I can't find the HMRC page with that formula, anyone?

edit:

http://www.hmrc.gov.uk/manuals/bimmanual/bim47825.htm

I'm a bit confused by the proportion of time a room is used for business use. One of those examples seems to claim taking a fraction of 24 hours, so even a full 8-hour day is only 1/3. But that's kind of dumb if you don't use the room for anything else... businesses don't get to claim 2/3 discount for not being open 24 hours.

Any clarifications?