iPad on expenses

[jamesgodwin]

Hi I'm a freelance web designer and I need to buy an iPad so that I can test sites, build apps etc. Am i able to claim this back through paying less tax, it will be used 100% for work.

 

[Ding Dang Doo]

Can't see why not... If you feel you can justify the need for one in the business, it's your business, you make the decision to buy one.

Pete

 

[TCCuk]

Yeah of course if its business related you can, you can even but new suits for work if you need one.

 

[Scalloway]

iPad yes, suits no.

 

[stugster]

What about a suit for the ipad?

 

[hackeron]

So can a limited company buy an iPad (or computer, desk) and claim the full cost of the item as an expense?

I thought more expensive items like this need to be logged as capital assets and depreciated every year?

 

[Scalloway]

Many businesses treat items costing less than £1,000 as expenses rather than assets.

 

[Walkol]

IMO, it depends on how material those costs are, so it will vary with size of company.

I personally, would not depreciated them, unless they are specific bits of kit worth serious money. My old place of work we didn't capatalise anything under £1k, and here its £2.5k.

 

[hackeron]

IMO, it depends on how material those costs are, so it will vary with size of company.

I personally, would not depreciated them, unless they are specific bits of kit worth serious money. My old place of work we didn't capatalise anything under £1k, and here its £2.5k.

The company in question has a turnover of around £30,000, an accountant recommended I depreciate everything purchased for the business that is over £100.

Do you think this is a bit overkill?

 

[andygambles]

The company in question has a turnover of around £30,000, an accountant recommended I depreciate everything purchased for the business that is over £100.

Do you think this is a bit overkill?

Yes slightly overkill but he could be doing that to slightly inflate your profit in the first year so you can take money out as dividends.

Personally I expense anything under £1k

 

[andygambles]

iPad yes, suits no.

Unless you get a company logo embroidered on them I believe

 

[hackeron]

Yes slightly overkill but he could be doing that to slightly inflate your profit in the first year so you can take money out as dividends.

Personally I expense anything under £1k

Any reason why I would want to artificially inflate my profit and pay additional tax? - Also it is the third year, not first.

I think I will list it as a "Computer Hardware" expense, thanks

 

[andygambles]

Any reason why I would want to artificially inflate my profit and pay additional tax? - Also it is the third year, not first.

I think I will list it as a "Computer Hardware" expense, thanks

So you can take higher dividends at lower tax. If you told the accountant you wanted x drawings a year he has worked out how to get that without overdrawn directors loans etc.

 

[SBlundell]

Any reason why I would want to artificially inflate my profit and pay additional tax?

Makes no difference - depreciation is added back for tax anyway. Dividends are based on retained accounting profit, tax is based on taxable profit. Taxable profit is after due allowance is made for the differences between depreciation & capital allowances ('tax depreciation').

So, it follows that whether you depreciate or not should have no effect on tax liability (if you expense the item but it has a life > 2 years you should strictly add it back & treat it under capital allowances).

 

[Walkol]

Makes no difference - depreciation is added back for tax anyway. Dividends are based on retained accounting profit, tax is based on taxable profit. Taxable profit is after due allowance is made for the differences between depreciation & capital allowances ('tax depreciation').

Of course it matters, by capatalising it, you spread the cost (tax wise) over numerous years depending on AIA/WDA allowance etc, by putting it through the P&L it included in that years tax calcs.

Personally, i think £100 is major overkill, but I suppose in a way is not a bad thing with regards to having the accounts 100% spot on, but it does make for extra work for very little.

Best write up a policy that your happy with regarding the parameters of when to put something to the balance sheet or the P&L. As long as you can justify it, there is no right or wrong answer (within reason).

 

[David Griffiths]

Of course it matters, by capatalising it, you spread the cost (tax wise) over numerous years depending on AIA/WDA allowance etc, by putting it through the P&L it included in that years tax calcs.
.

In reality most businesses would claim the whole expense for tax in year 1 through AIA, so Sam is correct, it makes no difference for tax purposes

 

[SBlundell]

Of course it matters,

Sorry that wasn't very clear. It makes no difference to the tax charge. The question asked was why inflate profit & therefore pay more tax.