Help... Introduction of Assets & Claiming AIA?

[tiredndizzy]

Hi All,

I hoping for some help with a few points regarding AIA.

I am planning to start a new business (sole trader).

I would like to introduce to my business some assets that I already own to keep the down the intial start-up costs, such as Computers, Printers, Cameras, Tools & Furniture.

I have read that I can claim for these under the AIA, but at a reduced rate as they have had some personal use prior to becoming part of my business. However there seems to be conflicting views regarding this?

Here are my questions:

Q1: Is it possible to do this?
Q2: If so, how do I calculate the percentage of personal / business use?
Q3: Alternatively, is it possible to sell these items to my business at fair market value and just claim 100% of the purchase price under AIA?

Q4: I do not have the original receipts for all the items I that would like to claim AIA, ie a toolkit made up of lots of different items but which cost several hundred pounds, will this pose a problem (esp in regard to Q2)?

Any help would be greatly appreciated
Thanks

 

[elaine@cheapaccounting]

Are these pre owned assets and not bought brand new?

How much are we talking about here?

 

[elaine@cheapaccounting]

FYI ....


What you can and cannot claim for

Any new expenditure on plant and machinery assets bought after 1 April 2008 for Corporation Tax, or 6 April 2008 for Income Tax qualifies for annual investment allowance, apart from these exceptions:

• cars - see the section below on capital allowances on cars
• plant and machinery previously used for another purpose, for example, a computer used at home and introduced into your business
• plant and machinery gifted to your business
• expenditure incurred in the accounting period in which your business ceases

See here:
http://www.hmrc.gov.uk/capital-allowances/plant.htm#1

 

[cheaper accountant]

Typed in error!

 

[tiredndizzy]

What you can and cannot claim for

• plant and machinery previously used for another purpose, for example, a computer used at home and introduced into your business

These were items that I bought personally and I have used (in my own office), but which I was slowly aquiring for the intention to use for a new business.

Laptops, Cameras, Laser Printer, Desks, Filing cabinets, Tools etc.
Approx value all in £3000.


If I cannot claim the AIA for introducing these items to my business, would I be better to dispose of them, invest the cash in my new business and then update them with new.

Could I then claim £3000 off my tax bill using my AIA? Or have I not understood the situation correctly?

 

[tiredndizzy]

Could I then claim £3000 off my tax bill using my AIA? Or have I not understood the situation correctly?

Assuming that I spent £3000 buying new replacement equipment?
Also do they have to be New? Is it not possible to claim for second hand goods? :|

 

[elaine@cheapaccounting]

You cannot claim AIA but would claim capital allowances.

However I would suggest breaking the cost down as the individual item could be treated as expenses depending on the individual cost.

 

[tiredndizzy]

from HMRC

Items that qualify for plant and machinery allowances

Tools, machinery, vehicles and other equipment you buy for your business will generally qualify for plant and machinery allowances.
Some common examples include:

• vans
• cars
• tools
• furniture
• computers
• machinery
• equipment

Assuming I spent £3000 buying new replacement equipment. All of the types of item I want to claim AIA are on that list?

I thought AIA were capital allowances?

 

[elaine@cheapaccounting]

Why are you selling that you have and buying new?

As I have said the items may be allowable as expense items (tell me the individual amounts) but you cannot claim AIA but WDA on the existing items.

You can claim AIA on new items but I don't think this is the best approach.

 

[elaine@cheapaccounting]

You need to break down the £3000 as you are not buying one but many items and these may be expense items rather than capital

 

[tiredndizzy]

Why are you selling that you have and buying new?

As I have said the items may be allowable as expense items (tell me the individual amounts) but you cannot claim AIA but WDA on the existing items.

You can claim AIA on new items but I don't think this is the best approach.

Computers & Related Equipment £1000
Laser Printer £150
Cameras & Related Equipent £300
Tools £250
Furniture £1000
Manuals & Reference Books £300

At what point (price) do they became expense?

Thanks for your time Elaine

 

[elaine@cheapaccounting]

There is no clear rules on when they are capital or expenses but I'd say ....

Computers & Related Equipment £1000 - break this down further please
Laser Printer £150 - expense item
Cameras & Related Equipent £300 - expense item
Tools £250 - expense item
Furniture £1000 - break this down further please
Manuals & Reference Books £300 - expense item as assume many books for £300

 

[tiredndizzy]

There is no clear rules on when they are capital or expenses but I'd say ....

Computers & Related Equipment £1000 - break this down further please
Laser Printer £150 - expense item
Cameras & Related Equipent £300 - expense item
Tools £250 - expense item
Furniture £1000 - break this down further please
Manuals & Reference Books £300 - expense item as assume many books for £300

Thanks Elaine, it is starting to make much more sense to me now

Computer £600, Related Equip (Misc and all under £100 per item) = Expenses?

Furniture, Work desk & Chair £300, Work table £100, Storage Cupboard £300, Filing Cabinets £200, Safe £100

 

[David Griffiths]

Could I then claim £3000 off my tax bill using my AIA? Or have I not understood the situation correctly?

With relation to this specific point, I don't think that you have understood the situation. If you claim allowances of £3,000, those reduce your taxable income by £3,000, not your tax. That means that your tax bill would reduce by 20% of £3,000 for a basic rate taxpayer (plus possibly 9% for Class 4 NIC)

So max saving is £810 not £3k

It's very unlikely to be worthwhile selling the kit and replacing with new, unless there are other reasons to do so. If you sell second hand, how much would you get? £1500 max? You then lay out £3k to replace it and you are £1500 down to save tax of only £800

Don't let the tax tail wag the commercial dog, as the old saying goes

 

[elaine@cheapaccounting]

Don't let the tax tail wag the commercial dog, as the old saying goes

All of David's saying are old

 

[tiredndizzy]

With relation to this specific point, I don't think that you have understood the situation. If you claim allowances of £3,000, those reduce your taxable income by £3,000, not your tax. That means that your tax bill would reduce by 20% of £3,000 for a basic rate taxpayer (plus possibly 9% for Class 4 NIC)

So max saving is £810 not £3k

It's very unlikely to be worthwhile selling the kit and replacing with new, unless there are other reasons to do so. If you sell second hand, how much would you get? £1500 max? You then lay out £3k to replace it and you are £1500 down to save tax of only £800

Don't let the tax tail wag the commercial dog, as the old saying goes

Thanks David, i can see the stupid error in my calculation and after considering Elaines advice I can see they can mostly be classed as expenses.

I did not realise that I could set a level at which to capitalise items as fixed assets, so was unsure of how to claim them.

I know this is probably fairly simple stuff, but I am new to business/bookkeeping and just trying to understand how and where to show this in my basic accounts.

Thanks to both of you for taking the time to reply.

 

[Walkol]

I did not realise that I could set a level at which to capitalise items as fixed assets, so was unsure of how to claim them.

Indeed. At my last job (practice) we did mainly sole traders - builders, consultants, hairdressers and the like - and our fa limit varied between £500-£1000 depending on the client. My current job (industry) we have a limit of around £2k. It will purely depend on your specific job and the price of that specific item (ie, you mentioned furniture for £1k, this was infact multiple items of around £300 of less, it is the individual and not the collective cost you should consider).