coffee machine not an allowable cost

[brindy]

Hi,

I've been an IT contractor for a while, but in the last few months I'm trying to turn my business in to something more like a proper software development house with its own products as well as doing consultancy to allow organic growth.

I recently employed a member of staff and now have office space, so I decided to buy a coffee machine for the office.

However, my accountant recently told me that this is not an allowable cost and that I'd have to pay for it out of my personal money. Because I paid it for it directly from my business account, it's now been classified as a "director's loan" and is going to be deducted from subsequent expenses / dividend payments.

I've worked at many offices in the past and all have had coffee / tea making facilities of one kind or another, paid for by the company. So is what my accountant saying correct?

Thanks in advance.

 

[mhall]

We put ours through as subsistence. I certainly am not paying for it personally

 

[brindy]

We put ours through as subsistence. I certainly am not paying for it personally

Thanks - I suppose I can do that for the coffee itself, but apparently not for the machine.

 

[Anonymouse72]

couldn't it be classed as office equipment?

 

[janet40wood]

If you use the coffee machine for business, clients visiting etc - and only for business then I would say this cost - plus the coffee could be allowable, but this item would need to be placed in your office - and used just in this designated area.
As you have rented office space - and have bought and stored this items for use at the office from where you trade - and they were used just for those rented premises - then this would be an allowable business cost.
Business expenses can, however, be a very grey area and the 'wholly and exclusively for business' rule applies.

 

[Scalloway]

A coffee machine is deductible if it is for staff and visitors.

 

[Anna Chandley]

Have you asked your accountant why s/he thinks it is not an allowable expense?

BTW I agree with Scalloway on it being allowable.


Anna

 

[brindy]

Have you asked your accountant why s/he thinks it is not an allowable expense?

Hi Anna, this was their response:

... the coffee machine and supplies the HMRC state that any expenses “should be incurred wholly, exclusively, and necessarily in performing your business duties.” Unfortunately, it is highly unlikely that HMRC would agree that a coffee machine would fall under this.

And later:

I think the issue here is not whether such facilities are provided, it’s whether the cost of providing them is classed as a deductible expense for corporation tax purposes. In essence, if a company chooses to provide such facilities for employees, there is no guarantee that the cost of doing so is treated as an expense in this way. There is no obligation for a company to provide such facilities, it is an optional extra so treating it as a tax deductible expense is inappropriate.

I've explained the machine is at my office and for use by all staff (all two of us) and of course if I ever have visitors they'll be getting use of it as well.

 

[Anna Chandley]

" the HMRC state that any expenses “should be incurred wholly, exclusively, and necessarily in performing your business duties.”




This is not the correct test to use. Wholly, exclusively and necessarily is the test for allowability of employee expenses.


The test for business expenses are that they should be incurrred wholly and exclusively for the purposes of the trade. The expenditure does not need to be necessary for the purposes of the trade.

I don't see any reason for saying that the cost of the coffee machine in the office was not incurred wholly and exclusively for the purposes of the trade so it is an allowable cost.


Anna

 

[brindy]

" the HMRC state that any expenses “should be incurred wholly, exclusively, and necessarily in performing your business duties.”

This is not the correct test to use. Wholly, exclusively and necessarily is the test for allowability of employee expenses.

The test for business expenses are that they should be incurrred wholly and exclusively for the purposes of the trade. The expenditure does not need to be necessary for the purposes of the trade.

I don't see any reason for saying that the cost of the coffee machine in the office was not incurred wholly and exclusively for the purposes of the trade so it is an allowable cost.

Anna

Thanks Anna, much appreciated!

 

[Karimbo]

I guess if the coffee machine was at a dedicated business office this would be an allowable expense no question. But if you're operating a home based business it would be very tough to make the claim that the coffee machine is exclusively for business use - especially when it's stored at your home kitchen..

Edit: re-read the OP

Ok it is used at dedicated office space. Really weird that the accountant has decided it's not an allowable expense. Is the office space an extension from your home? Or a dedicated commercial property?

 

[brindy]

Is the office space an extension from your home? Or a dedicated commercial property?

Dedicated commercial property.

 

[mhall]

I think it's time to change your accountant, If mine sent me that waffle I would be very unhappy.

 

[brindy]

I think it's time to change your accountant, If mine sent me that waffle I would be very unhappy.

Yeah, I've been starting to think that to be honest.

 

[Anonymouse72]

our old accountants used to send us waffle like that & for ages i didn't know any better & didn't question anything, they're the professionals, what do i know?.

when i got a bit more up to speed with accounts/business in general & did start to question stuff, they continued to waffle & try to blind me with ancient accountant speak, so i got rid & now use an online accountant that charges about half as much as the ancient ones did! far more efficient, friendly & approachable - they speak in plain English too, which is a bonus.

no end of little quirks came to light that the old accountants had been doing without our knowledge, all sorted now though.

 

[Chris Ashdown]

Presumably your accounts are not audited anyway so you can put it down as whatever you like

Following your accountants argument then large companies staff restaurants would also be banned

 

[prjbicell]

I have sold many a coffee machine in the past to many types of business. Lots of offices were included as customers. I have never known any of them not to consider that the coffee machine was not a tax deductible piece of equipment.

Get shot of your accountant is my advice. I have one in my office for me and just two staff and any visitors (golf mates really) and I have claimed on it every year for the last four years without a word from my accountant saying it was wrong.

 

[arcon5]

Surely this would go down on the balance sheet and be depreciated against over say 2 or 3 years? Rather than treated as an expense in the same way as you would treat the stock to go in it for example.

 

[prjbicell]

I am not sure in my case how the accountant sorted it. I thought it went down somewhere in the capital equipment category. All I know is that it was claimed against tax in that years accounts without any question

 

[arcon5]

Ye sounds like they dealt with it as a fixed asset. Usually depreciated over its expected life less salvage cost but you could I suppose set its estimated life over the current tax year only, thus depreciating the full balance at once. If the accounts aren't audited or anything I suppose it doesn't really matter

 

[Karimbo]

Ye sounds like they dealt with it as a fixed asset. Usually depreciated over its expected life less salvage cost but you could I suppose set its estimated life over the current tax year only, thus depreciating the full balance at once. If the accounts aren't audited or anything I suppose it doesn't really matter

coffee machines break down a lot. buy a coffee machine meant for domestic use for a smallish office and it will break in one year. Probably could just expense it. I expense computer mice, headsets, keyboards all the time.

I go through so many keyboards, because I eat at my desk. I just buy cheap £5 ones. Put the keyboard in the washing machine and dry for 48 hours. Sometimes it it works and completely clean. Other time it breaks.

 

[Anonymouse72]

I go through so many keyboards, because I eat at my desk.

I think you should invest in one of these, obviously we'll need a photo of you wearing it!

 

[arcon5]

coffee machines break down a lot. buy a coffee machine meant for domestic use for a smallish office and it will break in one year. Probably could just expense it. I expense computer mice, headsets, keyboards all the time.

I go through so many keyboards, because I eat at my desk. I just buy cheap £5 ones. Put the keyboard in the washing machine and dry for 48 hours. Sometimes it it works and completely clean. Other time it breaks.

Ye your probably right. I was thinking more along the lines of it being an expensive commercial type machine but if its only a small couple hundred quid one then yes would make it easier.