Self Employed: Mobile Phone on Finance Expense

[Henry Gregory]

Hi,
I usually outright purchase a mobile phone for my self employed business and and list the full value as an expense as it is 100% used for business purposes, it needs to be high quality with the camera and lots of storage. Then in three or four years, I buy a new one again, sell the old one on ebay and enter the money I earned from selling the old one in my tax return as they tend to still be worth a few hundred so I assume the tax man would want to see that I got money back on the old device and didn't just dispose of it.

Sadly, my current phone stopped working at only two years old and after taking it to be repared, I was told I would need to purchase an entirely new phone as it is not repairable. An absoloute disgrace as the device cost a lot and it is in pristine condition. I have argued, looked at taking legal action, but it just isn't worth the hassle.

I have had to purchase a new one with extra warranty coverage and insurance (so it was much more expensive) but this time on finance as I was not expecting to have to purchase a new phone so soon. I also figured the finance would be a good protection for the next two years as if it goes wrong, I should have more leverage to get it repaired or get my money back as it would not be fit for purpose.
What would be the best way to account for this expense? I am paying £60 per month for 24 months starting in December 23. Should I claim for the full £1440 in the current 23/24 year and nothing in 24/25 or should I just list my expenses for the new phone for 23/24 by adding up all of the £60 payments, This would take more time to do, and then do the same for 24/25?

Any advice would be greatly appreciated, I have few expenses so it is very rare for me to have to do anything different on my tax return, but this is slightly different.

 

[Nico Albrecht]

entirely new phone as it is not repairable

Apple Store ? All that sounds like their usual sales pitch and apple care up sell.

 

[Henry Gregory]

Apple Store ? All that sounds like their usual sales pitch and apple care up sell.

Yes, though I purchased from John Lewis who have been equally useless. I couldn't run my business for three weeks with no phone, so I had no other option but to get another one. As I said, an absoloute disgrace but I just don't have the resources to carry on with no phone and don't have the time to keep arguing. It seems I would need to prove an inherant fault from manufacture with the phone, it all seems so time consuming and difficult. Not fair.

 

[DWS]

How do you submit your accounts cash basis or accrual?
100% business? Not one private call, text or use of internet?

 

[Henry Gregory]

How do you submit your accounts cash basis or accrual?
100% business? Not one private call, text or use of internet?

Accural and nope.

I have my own personal phone on a different network, when I am working, due to the nature of my job, I can't use my personal phone and vice versa, I would have no need to use my work one as my personal one has unlimited everything unlike the work one. It has always been kept completely seperate.

 

[DWS]

You will need to check the finance agreement to see how to account for it as different types of finance are treated differently for accounting purposes, if it is an HP agreement then you can claim the whole capital amount of the purchase using capital allowances and claim back the interest element monthly through the profit and loss.

 

[MyAccountantOnline]

Hi,
I usually outright purchase a mobile phone for my self employed business and and list the full value as an expense as it is 100% used for business purposes, it needs to be high quality with the camera and lots of storage. Then in three or four years, I buy a new one again, sell the old one on ebay and enter the money I earned from selling the old one in my tax return as they tend to still be worth a few hundred so I assume the tax man would want to see that I got money back on the old device and didn't just dispose of it.

Sadly, my current phone stopped working at only two years old and after taking it to be repared, I was told I would need to purchase an entirely new phone as it is not repairable. An absoloute disgrace as the device cost a lot and it is in pristine condition. I have argued, looked at taking legal action, but it just isn't worth the hassle.

I have had to purchase a new one with extra warranty coverage and insurance (so it was much more expensive) but this time on finance as I was not expecting to have to purchase a new phone so soon. I also figured the finance would be a good protection for the next two years as if it goes wrong, I should have more leverage to get it repaired or get my money back as it would not be fit for purpose.
What would be the best way to account for this expense? I am paying £60 per month for 24 months starting in December 23. Should I claim for the full £1440 in the current 23/24 year and nothing in 24/25 or should I just list my expenses for the new phone for 23/24 by adding up all of the £60 payments, This would take more time to do, and then do the same for 24/25?

Any advice would be greatly appreciated, I have few expenses so it is very rare for me to have to do anything different on my tax return, but this is slightly different.

Do you use traditional accounting or the cash basis?

Edit - sorry should have read the replies so far I can see DWS has asked this

 

[Henry Gregory]

You will need to check the finance agreement to see how to account for it as different types of finance are treated differently for accounting purposes, if it is an HP agreement then you can claim the whole capital amount of the purchase using capital allowances and claim back the interest element monthly through the profit and loss.

Thank you for your help on this.

 

[Henry Gregory]

Hello everyone, just a quick revival of this thread. To recap, I had a perfectly good working business phone which just stopped working. The retailer John Lewis and Apple were both useless in helping and expected substantial amounts of money to have the device repaired. Seeing as it was already several years old and my need for a replacement quickly to run my business, I just got a new one on finance. The new one comes with proper coverage so whilst expensive, any issues are covered so I won't get in that situation again.

My previous phone which became faulty was declared as a captial allowance. Can someone tell me what I am meant to do about it as it has been sat in my drawer for some time now. It doesn't work and can't fixed without spending quite a lot of money. How can I account for this? In the past, I would sell an old piece of equipment on Ebay and then account for that in my return as I have got money back for something that was a capital allowance all be it less due to depreciation. How can I record for this broken device? I have never been in this situation and want to make sure I record it correctly. I had a quick look on Ebay and faulty handsets like this one seem to be selling for £25 so the value is negligible, I am not going to waste my time faffing around to sell it for such a small sum of money.

Thanks in advance.

 

[JEREMY HAWKE]

You have already claimed for it via the purchase I would just chuck it on the bonfire now

 

[DWS]

You have already claimed for it via the purchase I would just chuck it on the bonfire now

Agree, there is nothing to account for, if you sold it yes it’s a disposal if not then nothing else to do, for bookkeeping just depreciate to nothing
Job done.

 

[Henry Gregory]

Thank you both. That's good to know. It has been taking up a space in the top of my draw for some time now! Such a shame as it is pristine but just doesn't work and not worth the money getting it repaired. I will sling it. Thanks again.

 

[numbersrule]

Hi Henry Gregory
As you have said the old broken phone was originally capitalised, then my interpretation of that is that there will be a Mobile Phone Fixed Asset on the Balance Sheet. The current Mobile Phone Fixed Asset Value will be the original purchase price minus the depreciation to date. The depreciation to date is already in your accounts as an expense. The remaining current Fixed Asset Value should be written off by:

Debit 'Write Off Loss' Expense Account
Credit Mobile Phone Fixed Asset Account

Regarding Tax, the depreciation to date will have been added back thereby reducing your expenses in previous years because you can't claim capital allowances as well as depreciation.

Similarly, my understanding is that this year, the write off loss will also need adding back on because capital allowances have already been claimed so the write off can't be tax deductable.

 

[MyAccountantOnline]

When an asset is sold or scrapped on which capital allowances has been claimed it can create a balancing charge or allowance which you need to include on your tax return. HMRC have an explanation here -

Capital allowances when you sell an asset

Selling or giving away an asset you claimed capital allowances on - balancing charges, balancing allowances, closing your business, how to claim and pay tax on your tax return

www.gov.uk

 

[DWS]

When an asset is sold or scrapped on which capital allowances has been claimed it can create a balancing charge or allowance which you need to include on your tax return. HMRC have an explanation here -

Capital allowances when you sell an asset

Selling or giving away an asset you claimed capital allowances on - balancing charges, balancing allowances, closing your business, how to claim and pay tax on your tax return

www.gov.uk

But the disposal value is Nil, so nothing to include on the Tax Return

 

[MyAccountantOnline]

But the disposal value is Nil, so nothing to include on the Tax Return

Thank you for mentioning that DWS I should off course added that if 100% Capital allowances were claimed the balancing charge/allowance is nil. I posted the link to help anyone who was unsure of how to deal with assets being sold or scrapped.

 

[numbersrule]

But the disposal value is Nil, so nothing to include on the Tax Return

Yes, there's nothing to report provided the Year's Income stated on the Self Assessment has already had the Write Off Expense added back on ( assuming as MyAccountantOnline says, that 100% Capital Allowances were claimed previously ).

 

[DWS]

Yes, there's nothing to report provided the Year's Income stated on the Self Assessment has already had the Write Off Expense added back on ( assuming as MyAccountantOnline says, that 100% Capital Allowances were claimed previously ).

You can add back ‘Nil’ if you really want to