Expenses - a simple question?

goldndelicious

Hello All,

I started a business this year, so i'm yet to have to complete a tax return, but i want to get ahead of myself and get prepared.

My business is small, and home based, however i am likely to make a profit of a few thousand this year.

I've been keeping receipts for all materials i purchase to make my products, however this year i have bought....

Windows 7 for my computer
A new Hard drive for my computer
A few bookshelves
A set of drawers
A printer

My question is...

Can i claim these as a normal expense, or do i need to class them as a "capital asset" and apply some kind of depretiation to them?

They probably only make up about £300 in total

I'm hoping i can just class them as a normal expense, i certainly would like to simply deduct the cost of them in this first year, rather than mess around with deducting bits each year. If i have to go down the depreciation route, does anyone have any guidance as to how you work all this out?

Thank you!

nikki1520

As far as I know, the software is a consumable, not a capital asset. Neither are small items of office furniture or printers etc. In fact, there is something in place where you can claim 100% of a computer that is a capital asset in the first year - due to the fact the market moves so quickly, and so anything bought today would be worth next to nothing in 6 months.

Have you considered an apportionment for personal use? If you work from home, most Inspectors would expect to see something like this, unless you can demonstrate you don't use any of this stuff for private business (emails, surfing, printing etc)

Depreciation is dead simple if you use the straight line method -you apportion an asset over a time period, say 5 years, and then claim 20% of the cost each year. There's different rules for different assets though, and some have to be done on a reducing balance basis, which is more complicated. If you needed to use this method for anything, I would recommend getting advice as it's easy to screw it up.

Goood luck

goldndelicious

Thanks Nikki,

Well, the hard drive (whilst in my computer which i use for personal use as well) is solely to store business data on (i have two other hard drives for the machine / personal bits)

Windows 7, well i can see i'll need to proportion that

and the book cases are solely for business use.

How can i determine what proportion of an item is acceptable? In reality i probably use the computer 80% business and 20% personal

PlutoinCapricorn

If your turnover is under £15,000 then you just need to report total income and total expenses to arrive at the total profit: there is no requirement to list all the amounts received and items bought or expenses incurred separately. So in your position, I would put them on as expenses if they really cost you so little. The Windows 7 I am sure is an expense anyway. I think there is an amount under which you can treat items as expenses: perhaps other people will help out here.

I think that you may be on the borderline or in the grey area: a very cheap stapler may last you for years but I am sure that HMRC would not expect you to treat it as a capital item, but a van or heavy machinery must be depreciated.

I would take a chance!

goldndelicious

Thanks,

I'm probably not going to turn over 15K in the tax year - is this classed as the "short form" when it comes to tax return time?

People have advised me to get an accountant, which i am still considering, but if i can do it all myself and save a few quid, i'd like to do it myself.

PlutoinCapricorn

Good for you for getting ahead of the game and not waiting to the last minute to sort things out.

You could always phone HMRC and ask their advice!

I recommend filing online, it is the easiest and safest way to do it.

hunnie

Hello;
Just wanted to point out that you can use the short tax return if you:

"were self-employed, that is, you worked for yourself and not for an
employer, and your turnover (money earned before expenses) was below

£30,000. "

Not just £15,000 as stated earlier.
Also you can't file online when using the short tax return.
Hunnie

fengirl_2

But I should point out that whether you decalre on the short form or the long form, you do need to produce at least an incme and expenditure account on which to base the self asssessment entries.

Savvy_Sue

goldndelicious wrote: »

People have advised me to get an accountant, which i am still considering, but if i can do it all myself and save a few quid, i'd like to do it myself.

It may be worth phoning a few, making a couple of appointments with people you like the sound of. A good one would be prepared to spend a little time without charging you, and if you feel the kind of advice they are giving could continue to save you money then it's worth using one.

That's probably not making much sense, so just consider that all the time you spend working out what you can and can't charge for, and how to do it, is time you don't spend earning money in your core business. If you've got plenty of time for that kind of thing, it's not a problem if you can stay on top of changes etc. If you're short of time, or you struggle to get your head round this kind of thing, then paying for someone to advise you whose core business is staying on top of changes and looking for the best way of doing things etc is good VFM.