Equipment purchased for business purposes

[TheCyclingProgrammer]

So long as they are used solely for the business and not for personal use, you just claim the amount you paid for them to your co.

Not quite...private use of business equipment is fine as long as that use is "not significant". Which basically means that the main purpose for you buying the equipment is that you need it to run your business.

HM Revenue & Customs: Homeworking

"Not significant" explained in detail:

http://www.hmrc.gov.uk/manuals/eimanual/EIM21613.htm

[northernladuk]

99%. I think your guessing there. Every contractor I know has a room set aside as an office. I paid to have mine turned into an office, so the company paid for that. Computer equipment, printers, paper, pens, stamps are all expensed. If you think like an employee then you'll always be an employee.

I also have a home office but I had this before I started contracting and it is where the all the equipment stays so it isn't in the living rooms. Anyone goes in there if they want to print, use a desktop etc. I have chatted to a couple of the guys here and they are the same. None of them are dedicated and would meet the wholly rule.

I also know people who are not contractors with the same set up.

Let's be fair here I am being a pedant based on Taxless comments around letting it to yourself and commercial rates, sharing bills and the Capital Gains comments. For the £50 a month situations then it is fine.

I still think my guestimate of people with wholly use office for business purposes only is close.

[Taxless]

Read what is written

I am sorry but I was responding to a specific query, not providing a detailed paper on all of the ins & outs of letting space to your company.

If you have not posted the query you should not simply adopt the answers to suit your own facts, which may be quite different. If in doubt, post a specific query.

I know we all want to pay less tax but you have to be realistic on how far you can push things.

It is also the case that times are hard and people are looking to cut costs and a number of people seem to view cutting accountancy bills as a good place to start.

I would always advocate seeking professional advice (yes I have a vested interest) to ensure that what you are doing will stand up to HMRC scrutiny, but also the accountant may be aware of something that can help you legitimately reduce your tax exposure.

[MarillionFan]

But I would argue that 99% of contractors do not have an office at home that is used "wholly & exclusively" for the business. It will be their home desk with their home computer that other people in family use for doing personal things.

Sorry, just being a pedant here. New guys that come on here are going to be all over this like a rash without realising the in's and out's

99%. I think your guessing there. Every contractor I know has a room set aside as an office. I paid to have mine turned into an office, so the company paid for that. Computer equipment, printers, paper, pens, stamps are all expensed. If you think like an employee then you'll always be an employee.

[northernladuk]

I couldn't agree more.

Any expense claimed by the company must be defended as "wholly & exclusively" for business purposes and so the amount claimed must be defendable.

In this case the individual has stated that he will have to work from home on occassions and so a "reasonable" charge could be made.

But I would argue that 99% of contractors do not have an office at home that is used "wholly & exclusively" for the business. It will be their home desk with their home computer that other people in family use for doing personal things.

Sorry, just being a pedant here. New guys that come on here are going to be all over this like a rash without realising the in's and out's

[Taxless]

Agreed

I couldn't agree more.

Any expense claimed by the company must be defended as "wholly & exclusively" for business purposes and so the amount claimed must be defendable.

In this case the individual has stated that he will have to work from home on occassions and so a "reasonable" charge could be made.

[northernladuk]

You say "I am looking at buying ....", but I assume the new company will be making the purchase?

On that basis, the company will probably be able to claim 100% of the cost in year 1 (if it needs it all) as an Annual Investment Allowance, see : Annual investment allowance | Business Link

If you have not already considered it, you could also charge the company a rent for the use of part of your home for part of the time, which would enable you to charge some of your personal household expenses against the rent.

A simple rental agreement should be drawn up based on commercial sq m rental rates (see local estate agents websites) and you should not allow the company exclusive use of a room in the home to avoid any Capital Gains tax complications when you sell the property.

Assuming of course that you are actually using it. Being based on client site 9-5 would not constitute using your office enough to do this comfortably. Common sense would need to be applied here. Just because you can claim this doesn't mean you can abuse it.

From what I have seen on this forum over the years no accountant so far has condoned this approach for IT contractors based at clients site.

[Taxless]

You or the company?

You say "I am looking at buying ....", but I assume the new company will be making the purchase?

On that basis, the company will probably be able to claim 100% of the cost in year 1 (if it needs it all) as an Annual Investment Allowance, see : Annual investment allowance | Business Link

If you have not already considered it, you could also charge the company a rent for the use of part of your home for part of the time, which would enable you to charge some of your personal household expenses against the rent.

A simple rental agreement should be drawn up based on commercial sq m rental rates (see local estate agents websites) and you should not allow the company exclusive use of a room in the home to avoid any Capital Gains tax complications when you sell the property.

[Badger99]

Thanks All

[Clare@InTouch]

As Zed states depreciation isn't allowable against tax, and the rate you use just needs to be realistic given the expected useful life of the asset. 25% straight line for example will assume a useful life of 4 years (as after then the asset will be worth zero in your accounts). Computer equipment could be as much as 33.3% straight line as anything techi these days tends to become obsolete (and therefore nigh on worthless) rather quickly.

If an asset is under £1,000 then I'd look at writing it off against the P&L in the first year rather than capitalising it.

[zedAccounts]

Depreciation is generally 20% per year (straight line or reducing balance). Depreciation is not an allowable expense but HMRC provides relief through Capital Allowance / AIA schemes.

ZED.

[BolshieBastard]

Hi All,

I have just incorporated and am starting a contract in a couple of weeks.
Can anyone advise on how to account for equipping an office at home? I will need the capability to work from home on occasions and have a small study I can use as an office. I was looking at buying a PC/Printer/Monitor second had from a ex-contractor friend. How do you account for purchases such as these if they are not new goods, and how do you also account for depreciation?

Thanks

So long as they are used solely for the business and not for personal use, you just claim the amount you paid for them to your co. Obviously you cant inflate the price you paid so your co pays you more money for them.

It doesnt really matter that the goods are second hand. The price you pay is the price your co re imburses you. Unless your ex contractor friend is still VAT registered (unlikely) you wont be able to claim any VAT element for your co, assuming you are also VAT registered and not on the FRS.

Havent a clue about depreciation.

[Badger99]

Hi All,

I have just incorporated and am starting a contract in a couple of weeks.
Can anyone advise on how to account for equipping an office at home? I will need the capability to work from home on occasions and have a small study I can use as an office. I was looking at buying a PC/Printer/Monitor second had from a ex-contractor friend. How do you account for purchases such as these if they are not new goods, and how do you also account for depreciation?

Thanks