Free Camera, is it really

[whitbydave]

Hi

I hope I'm not covering old ground but I probably am , so apologies for that.

Question 1
I went self employed in may as a photographer I have a day job and do bits and bobs of photo work at the weekends etc, with my day job and the part time I will still be under the higher tax bracket and I don't think I'm going to turn over more than £300 in the first year from the photography.

I'm considering making use of a 10 months interest free offer from Jessops on some equipment, am I right in thinking if I get the kit interest free for 10 months pay it off just before the end of the tax year then put my self assessment in I will get the cost of the camera back in my account, if I put in for the 100% capital allowance on it. As I will be paying tax from the day job so I can claim back against that?

Question 2
If this is the case what if I buy more equipment than the amount of tax I pay in my day job. Would that be refunded in cash or a allowance for the following year.

Many thanks I hope it makes sense.

[consultant]

Why do you think you will get the cost of your camera back?

Best to have a word with an accountant, as full knowledge of your circumstances will probably be required.

[Anna Chandley]

Hi

I hope I'm not covering old ground but I probably am , so apologies for that.

Question 1
I went self employed in may as a photographer I have a day job and do bits and bobs of photo work at the weekends etc, with my day job and the part time I will still be under the higher tax bracket and I don't think I'm going to turn over more than £300 in the first year from the photography.

I'm considering making use of a 10 months interest free offer from Jessops on some equipment, am I right in thinking if I get the kit interest free for 10 months pay it off just before the end of the tax year then put my self assessment in I will get the cost of the camera back in my account, if I put in for the 100% capital allowance on it. As I will be paying tax from the day job so I can claim back against that?

Question 2
If this is the case what if I buy more equipment than the amount of tax I pay in my day job. Would that be refunded in cash or a allowance for the following year.

Many thanks I hope it makes sense.

In answer top question 1. You can claim annual investment allowance (AIA)on the camera when you purchase it not 10 months later when you actually make the payment. You can claim AIA on purchases of up to £100k per tax year. If you make a loss in your self employment you can set this loss against any other taxable income in the year and receive a refund if that income has been fully taxed at source. In order to set trading losses against other income you must be trading with a view to making a profit.

Question 2. The more equipment you buy the greater the AIA claimed and the greater the loss in the year. As above you can set this loss against other income in the year. The problem will be that if you are spending large amounts on equipment with very low income, HMRC may decide that you are not actually trading with a view to make a profit and disallow your claim to set trading losses against other income. If your claim was disallowed for this reason you would then only be able to carry losses forward to set against future self employed profits from the photography trade.

Anna

[Anna Chandley]

Having reread your question I just wanted to clarify that you do not get a tax reclaim equal to the loss carried back.

For example

You buy a camera for £500 and have self employed income of £300 with no other expenses. Claiming full AIA leaves you with a loss of £200.

You have employment income of £30,000 in excess of your personal allowance on which you have paid tax at 20% of £6000. This equates to gross employment income of £37475 in 2011/12.

You make a claim to set your losses against employment income which reduces the taxable income to £29,800 which reduces the tax due to £5960 resulting in a tax refund of £40 ie 20% of the loss.

If your self employment losses are larger say £38,000. If you want to set losses against other income you will need to use £37475 of your losses and carry the remainder forward. You also waste your personal allowance as you must carry back as much of the loss as there is income to set it against.

You can choose to claim only part of your AIA so that the loss to carry back does not waste allowances. where you have not claimed AIA on an asset you claim a 20% writing down allowance o0n the balance in subsequent years,