Ltd company laptop headache

[Gurpreet Khaira]

Hi everyone, I started my Limited company about a year ago and it's now come to the point where I am thinking of buying a laptop 100% for business use. I have scoured the net and I'm getting confused as to how much I can claim back off my corporation tax.

My question is:

If I buy a laptop for business use (costing for example £2000 including
VAT) as a capital item, apart from the VAT which can be claimed back is the
remaining capital cost (£1666.67) allowable as a business expense and thus
comes off my corporation tax?

 

[Scalloway]

Yes you can claim the full amount as Annual Investment Allowance (AIA). The cost of the laptop will reduce your taxable profit.

https://www.gov.uk/capital-allowances/annual-investment-allowance

 

[Bob]

It doesn't "come of my corporation tax". It reduces your profits chargeable to corporation tax and assuming you pay CT at 20% will reduce the amount of tax due on your CT profits by £1,666 x 20% i.e. £333

 

[Gurpreet Khaira]

Thanks for your replies, however the two responses seem conflicted, or are they both saying the same thing and I'm not getting it

 

[Clinton]

"will reduce your taxable profit" and "reduces your profits chargeable to corporation tax..." are the same thing.

Your profits will be lower as a result of this expense and so any tax you pay will be calculated on the profit figure you're left with after deducting this expense.

 

[Bob]

They're both saying the same thing

They are both saying that the cost would reduce your taxable profit not your actual tax. You Pay tax on your profits if a company at 20%. Profit of £50,000 Tax at 20% would be £10,000.

Buy an assets eligible for AIA costing £10,000 will reduce your profit to £40,000. Tax at 20% would be £8,000.

The purchase of £10,000 has therefore reduced the tax by £2,000 i.e. the amount of the purchase at the tax rate £10,000 at 20%

Hope this explains it better

 

[Alan]

costing for example £2000 including
VAT

What sort of laptop cost £2000?

 

[Scalloway]

There are a few here.

http://www.laptopsdirect.co.uk/st/laptops-between-1500-and-2000-pounds

 

[Gurpreet Khaira]

Ok thanks to you all I totally get it! Regarding the laptop a fully specced Mac book pro is around the cost I quoted.

 

[Alan]

Yes fully spec'd Mac book Pro at £1,500 if you are a power user web designer, but £2k+ gaming machine for businesses - total waste of money IMHO.

Majority of businesses that require a bit of email / web applications and a bit of word processing / spreadsheets can operate on a machine a quarter of the cost. Not that the taxman cares, just my thoughts.

 

[Gurpreet Khaira]

Thanks, I am an IT Contractor Web Developer and I would be installing Visual Studio and SQL server, gaming is not something I would be interested in, strictly a business machine for work. Besides I like the MacBook pro laptops having used them before so an upgrade when the next gen comes out is what I'm aiming to do.

 

[MikeJ]

Why would you buy a mac to run windows software? I know you can emulate Windows, but surely if the prime purpose is to run windows based software, a PC would be better?

 

[Gurpreet Khaira]

Simple really, running windows is no issue at all, lots of my colleagues do this, regarding why I want a Mac, I really like their design and the UX/UI.

 

[MyAccountantOnline]

.... allowable as a business expense and thus
comes off my corporation tax?

Its something people often get confused with expenses arent ever deducted from the actual tax you pay.

The tax you pay is calculated based on profit so anything which reduces profit (which is allowable for tax purposes) reduces the amount of tax you pay.