Self-employed tax deduction on laptop bought on interest free credit

EmmaL
EmmaL Posts: 15 Forumite
Hi there - I'm self-employed and as a sole trader do my accounting on a cash basis. I need a new computer so I thought it would be a good idea to buy it before the end of the financial year to help reduce this year's tax bill.

If I buy it on interest-free credit can I still deduct the full value of the laptop in this year's tax, or do I need to pay for it out-right?

Thanks
Emma

Comments

  • antrobus
    antrobus Posts: 17,386 Forumite
    EmmaL wrote: »
    ...If I buy it on interest-free credit can I still deduct the full value of the laptop in this year's tax, or do I need to pay for it out-right? ...

    Yes.

    Businesses are allowed to buy stuff on credit. :)
  • dori2o
    dori2o Posts: 8,150
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    As antrobus says, yes you can. With things bought on credit the important date is the point of sale date, not when its paid for.
    [SIZE=-1]To equate judgement and wisdom with occupation is at best . . . insulting.
    [/SIZE]
  • EmmaL
    EmmaL Posts: 15 Forumite
    Thank so much antrobus and dori20 for your helpful replies. Exactly what I was hoping to hear!
  • Snakey
    Snakey Posts: 1,174 Forumite
    I don't think it's right though. If you're using cash accounting you need to have actually paid for it.

    https://www.gov.uk/simpler-income-tax-cash-basis/income-and-expenses-under-cash-basis

    See second para under heading "expenses" and the third bullet point in the list, and also second para under the heading "cars and other equipment".

    :(
  • dori2o
    dori2o Posts: 8,150
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    Snakey wrote: »
    I don't think it's right though. If you're using cash accounting you need to have actually paid for it.

    https://www.gov.uk/simpler-income-tax-cash-basis/income-and-expenses-under-cash-basis

    See second para under heading "expenses" and the third bullet point in the list, and also second para under the heading "cars and other equipment".

    :(

    For things paid for by credit (card or agreement) the date of sale is what you go by. As far as HMRC are concerned the item is paid for. You reveive a bill of sale which states paid. The fact you have set up a credit agreement or paid via credit card means nothing. The item, in this case a laptop, was SOLD on the date it was purchased. As far as the retailer is concerned the item is paid for. Thas the same for HMRC.

    The reference in the guidance above relates to things like trade accounts (I believe the term is rolling credit) where you would buy materials for a job but pay for them only on completion of the job or rolling payments such as utilities. It means that if you were to obtain materials and pay for them later, or like with utilities where you use the utility means you can only claim the payments you have made during the year, not claim the expense when the item was received. Unlike my example above the retailer does not consider these items paid for until the money is received by them.

    If the OP was to default on their credit agreement it would be the finance company who recover the outstanding amount, the retailer wouldn't seek to repossess the item as far as they are concerned the item was paid for. Just as ASDA wouldn't ask for that joint of beef, bag of potatoes, veg, yorkshires and gravy you bought from them if you didn't pay your credit card bill.
    [SIZE=-1]To equate judgement and wisdom with occupation is at best . . . insulting.
    [/SIZE]
  • Snakey
    Snakey Posts: 1,174 Forumite
    Well, every day's a school day!
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