Business Expenses

NICHOLAS_2

Hi,

I'm self employed and relatively new to having to account for expenses. I never used to have that many but i'm expanding into different areas.

If i buy items like an office desk (for use in an allocated space at home) or a vacuum cleaner to clean up any mess i make in a customers home, is that stuff simply classed as an expense and therefore deducted from my taxable profit?

InsideInsurance

https://www.gov.uk/expenses-if-youre-self-employed/office-property

Buying capital purchases - ie something that has a residual value/ that you could sell at a later date and recoup some of your monies - is treated differently to services or consumables depending on what accounting basis you are following.

The above link should help you.

Remember that to claim 100% of its value you should be using it purely for business purposes. If you use the vac at home and for the business then you can only count part of its value towards the business

NICHOLAS_2

OK, i get it. So expenses are things like paint that gets put on walls, advertising bills, work clothes, food, petrol etc etc

Anything like hand tools or power tools, desks, laptops, etc etc that could have a resale value is treated differently but until it is sold on or is ran into the ground you can claim for the amount you use it for business purposes.

I only plan to buy stuff that i will use 100%, in most cases, which keeps things more simple. Although i wouldn't know how anyone could tell if the vac i used to suck up saw dust or what have you gets used at home now and then

NICHOLAS_2

Hi, having read further on the hmrc site, and working on the assumption i go with cash basis accounting, it would seem that it would be considered an allowable expense.

When to claim capital allowances instead of allowable expenses

If you use traditional accounting, you can’t claim allowable expenses for things you buy and keep to use in your business, eg cars, desks or machinery - but you may be able to claim these costs as capital allowances.

If you use cash basis accounting and buy a car for your business, you can claim this as a capital allowance. However, all other items you buy and keep for your business should be claimed as allowable expenses.

So if i go with cash basis accounting, technically my expenses can all be dumped together in the same pile marked allowable expenses and all i will have to do is work out the percentage used for expenses that are not consumable? Is this correct? Or am i missing the plot.

TheTracker

Items like furniture and computers are capital assets. You log these in your accounts as assets subject to depreciation (typically 25% per annum). Recompensing the purchaser is treated the same as any non-capital purchase. All subject to the expenses being fair for your trade.

PlutoinCapricorn

There is a bit of a grey area between things that are obviously capital items and obviously classed as sundry expenses. Vans, heavy machinery, very expensive photographic equipment are capital expenditure; a packet of envelopes, electricity and other consumables are general expenses.

A stapler is an actual item, but it would be ridiculous to treat something that costs £1 in Poundshop as capital expenditure! I put a £400 laptop into my general expenses. If your turnover is under £70k approx, you just give the total expenses and not an itemised list.

NICHOLAS_2

Yes it will be below 70k.

I just want things to be simple.

I think in general the theory behind it all is pretty simple, whatever you buy, food to keep you alive during working hours, tools, office equipment etc should be claimable against your tax bill.

I will give a figure for the expenses and obviously try to keep receipts in some sort of date order and purchase as much stuff as i can with my business bank account so that should a query arise later down the line i have things covered.

paddyrg

NICHOLAS wrote: »

I think in general the theory behind it all is pretty simple, whatever you buy, food to keep you alive during working hours, tools, office equipment etc should be claimable against your tax bill.

Not quite - if you were an employee you'd have to have lunch, so normal lunches won't be claimable. If, however, you're on a business trip away from a kitchen then they likely will be. Think more in terms of things for which you get some business use - teams of paper, etc.

NICHOLAS_2

paddyrg wrote: »

Not quite - if you were an employee you'd have to have lunch, so normal lunches won't be claimable. If, however, you're on a business trip away from a kitchen then they likely will be. Think more in terms of things for which you get some business use - teams of paper, etc.

I work in peoples houses most of the time. I generally buy a few drinks, energy drink, water, some thing to eat like a breakfast snack or sandwich etc and can usually spend at least 5 quid. In my view i should be able to claim that 5 quid against my tax as it's stuff i wouldn't have bought if i was in the house as i generally like to make healthy food but i'm not fond of making stuff to take to work with me.

TheTracker

NICHOLAS wrote: »

I work in peoples houses most of the time. I generally buy a few drinks, energy drink, water, some thing to eat like a breakfast snack or sandwich etc and can usually spend at least 5 quid. In my view i should be able to claim that 5 quid against my tax as it's stuff i wouldn't have bought if i was in the house as i generally like to make healthy food but i'm not fond of making stuff to take to work with me.

Look up per diem allowances and chat to an accountant about efficiently calculating subsistence. There are various working situations where it is acceptable to expense per diem.