Sole Trader: Expensive Swivel Chair

[Henry Gregory]

Hello there,
I don't have many expenses in my line of self employed IT work as for now at least, almost all hardware is actually provided by my customers.

I have been doing substantially more from home than I used to since Covid, so I have had to purchase a proper swivel chair. It was not cheap, it was over £1000 but is a proper one for IT work and recommended by my physiotherapist due to spinal issues I have.
This is used solely for my self employed work purposes and it in a seperate room in the house so not used for anything else - not that you would want to use a swivel chair for anything but work.

Can someone tell me how I should record this expense?
In the past, when I have purchased a new work phone for example, I have listed it as an expense in my Capital Allowance section of my expenditure sheet. In the future when I get a replacement phone, I have sold the old one (which was listed as a Capital Allowance) on Ebay and then listed the money I made from the sale as income on my profit and loss under the section Profit from the Sale of Asset.

Can anyone tell me if I would do the same with the chair? I don't plan to sell it any time soon, but my experience of recording expenses like this is very rare as I don't really make many larger purchases and I don't want to make any mistakes.

Thanks in advance.

 

[Scalloway]

Yes it is an asset that you can claim capital allowances for. If you sell it for more than you have claimed for the excess sum goes in the capital allowances section as a balancing charge.

 

[MrGerbil]

Just from what you have said I can see several mistakes you have been making. You need to appoint an accountant and get him to review what you have done.

 

[MyAccountantOnline]

Hello there,
I don't have many expenses in my line of self employed IT work as for now at least, almost all hardware is actually provided by my customers.

I have been doing substantially more from home than I used to since Covid, so I have had to purchase a proper swivel chair. It was not cheap, it was over £1000 but is a proper one for IT work and recommended by my physiotherapist due to spinal issues I have.
This is used solely for my self employed work purposes and it in a seperate room in the house so not used for anything else - not that you would want to use a swivel chair for anything but work.

Can someone tell me how I should record this expense?
In the past, when I have purchased a new work phone for example, I have listed it as an expense in my Capital Allowance section of my expenditure sheet. In the future when I get a replacement phone, I have sold the old one (which was listed as a Capital Allowance) on Ebay and then listed the money I made from the sale as income on my profit and loss under the section Profit from the Sale of Asset.

Can anyone tell me if I would do the same with the chair? I don't plan to sell it any time soon, but my experience of recording expenses like this is very rare as I don't really make many larger purchases and I don't want to make any mistakes.

Thanks in advance.

You can claim capital allowances on equipment like this used in your business if you use traditional accounting rather than cash basis accounting. Have a read here also make sure you read up on the enhanced capital allowances.

You've not treated sales of capital assets correctly - when you sell them they aren't income in the P&L you have to include them in your capital allowances claim and will generally have a balancing allowance or a balancing charge.

If you find capital allowances hard to deal with yourself (whilst it may not give you the best tax saving) read up on using the cash basis.

 

[Henry Gregory]

You can claim capital allowances on equipment like this used in your business if you use traditional accounting rather than cash basis accounting. Have a read here also make sure you read up on the enhanced capital allowances.

You've not treated sales of capital assets correctly - when you sell them they aren't income in the P&L you have to include them in your capital allowances claim and will generally have a balancing allowance or a balancing charge.

If you find capital allowances hard to deal with yourself (whilst it may not give you the best tax saving) read up on using the cash basis.

Thanks for your post. This gets so complicated. I thought I had been doing things correctly. You mention that I have not treated sale of capital assets correctly. The way I have done it, would this mean I lose out rather than HMRC? If so, I will leave it. I just don't want any recourse where they come after me for money!

With regards traditional accounting/cash basis accounting. I am quite sure I am using traditional accounting. If a customer doesn't pay me or I don't get payment until May 2022 for work in Feb 22 as an example, I would record and consider this income for 21-22 financial year as the services were provided in Feb which falls under part of 21-22.

For each year, I keep a tab in excel which has expenses broken down into
Capital Expense (chair),
Rent/rates (portion of power bill),
Repairs & replacement equipment (never used this),
Professional fees (never used this),
Telephone & Office Costs (mobile phone, portion of broadband bill)
Postage & Stationary (anything linked to sending out my bills)
Sundry (odd low value items such as batteries, covid masks, pens, screen protector for business phone).

On my Profit & Loss, I have my income which is my total from fees throughout the year.
Then expenses are broken down by the above points so anyone can clearly see my total expenses but then broken down into those categories.

 

[Scalloway]

You mention that I have not treated sale of capital assets correctly. The way I have done it, would this mean I lose out rather than HMRC?

You won't lose out the way you do it nor will HMRC. The money you recieved will be taxed.