Archive for Downsizer For an ethical approach to consumption
 


       Downsizer Forum Index -> Small Business Chat
sally_in_wales

Capital allowances

I'm confused, I've so far never had to put any equipment through the business accounts, but the 'new' (about a hundred years old but new to me) sock machine is expensive enough that I need it to show up somewhere.

I tried looking on the tax office website but it was all gibberish to me and I'm still none the wiser, for each bit saying only certain percents counted, another bit suggested it might be ok to put it all through cos my business is so small.

Can anyone spell out to me how I add this purchase to my accounts (my accounts are very much one column for money spent, one for money coming in, the difference is what goes on my tax return every year, so its not complicated stuff usually and we are talking a very small turnover) and how much I'm meant to put in. I'm not sure how something thats already a hundred years old can have depreciation calculated.
Penny

http://www.businesslink.gov.uk/bdotg/action/layer?r.s=tl&r.l1=1073858808&r.lc=en&r.l2=1073859194&topicId=1073868259

It may help to read this, and then ask if need anything explaining further.
wellington womble

When things get tricky I have generally just phoned the inland revenue and asked the question - they have always been very helpful, even if I felt it was a stupid question. Far more so than some companies that I have been trying to buy stuff from, actually!
sally_in_wales

This is whats confusing me:

Quote:
The writing-down allowance for most plant and machinery purchases is 20 per cent. If the expenditure is 'special rate expenditure' the writing down allowance is 10 per cent. In addition, small businesses may be able to claim a plant and machinery writing-down allowance of up to £1,000 if the pool value falls below £1,000 in a 12 month accounting period.


My machine was £500, its my only machinery etc purchase this year, and I hope it will last for another 100years, do I put it down as 10% a year or does the last bit mean I can put it all through?
stumbling goat

capital expenses in the form of equipment is written off over so many years, but that does not mean the item has to become useless or disposed of. the item may be of soime use for many eyars to com, that is a bit of a perk i guess. i had several items written off or allowed for over 5 years that went on to give income for many years after.

i would claim the 20% in the first year at least. fwiw i have had telephone conversations with the taxman and found them very helpful.

sg
gil

ISTR that on my tax return in the explanation booklet, it said that small businesses could claim 50% capital allowances of the cost of equipment in the first year.

Phone them and ask.
Barefoot Andrew

I'm no expert but the following is my understanding:-

On the face of it, claims for capital expenses need to be staggered in the way others have mentioned above. Typically 50% in the first year as Gil says, then 25% in Y2, the final 25% in Y3. You can find some outline comments, plus links to all sorts of docs & advice, on the HMRC website here.

However... there is also a scheme called the "Annual Investment Allowance" whereby 100% of a capital purchase can be claimed in the first year, provided certain criteria are met. On this page you'' find a link to the SA103F-Notes.pdf. See box 48 in this document (it's on page 10).

A.
vegplot

sally_in_wales wrote:
This is whats confusing me:

Quote:
The writing-down allowance for most plant and machinery purchases is 20 per cent. If the expenditure is 'special rate expenditure' the writing down allowance is 10 per cent. In addition, small businesses may be able to claim a plant and machinery writing-down allowance of up to £1,000 if the pool value falls below £1,000 in a 12 month accounting period.


My machine was £500, its my only machinery etc purchase this year, and I hope it will last for another 100years, do I put it down as 10% a year or does the last bit mean I can put it all through?


You may be able to write it down in the first year. Ring your local tax office, they're often very good these days at answering queries such as these.
beean

sally_in_wales wrote:
This is whats confusing me:

Quote:
The writing-down allowance for most plant and machinery purchases is 20 per cent. If the expenditure is 'special rate expenditure' the writing down allowance is 10 per cent. In addition, small businesses may be able to claim a plant and machinery writing-down allowance of up to £1,000 if the pool value falls below £1,000 in a 12 month accounting period.


My machine was £500, its my only machinery etc purchase this year, and I hope it will last for another 100years, do I put it down as 10% a year or does the last bit mean I can put it all through?


You want to confirm with the Inland Revenue, who will be helpful.

It seems to be that you can claim the first £1,000 in TAX value of fixed assets (cost less writing down allowance claimed) in the same year. If you have already got over £1000 (tax value) of assets then you can't get immediate relief (i.e. 100%) of the cost of the new asset in this year, you'd need to use the % releif.

Bear with me: I'm going to attempt an example to explain what I mean Shocked . Say you bought an asset for £800 last year and claimed your writing down allowance on it (dunno the correct %, but will pretend it was 20% for this).
The tax value of this asset would be £800 less £160 = £640.
The year before you bought an asset for £500, and so you've claimed 2 years of writing down allowance on it, still at 20%. The tax value of this asset would be £300 (£500 @20% per year for 2 years).
So your "pool value" is £640 + £300 = £940.
If you then bought an asset for £500, this would mean your tax pool would be £1,440 (£940 for the "old" assets and £500 for this years purchase), so you couldn't use the exception.
D'you see the what am trying to say?

It's well worth calculating it then calling the inland revenue to confirm though.
       Downsizer Forum Index -> Small Business Chat
Page 1 of 1
You must set the ad_network_ads_377.txt file to be writable (check file name as well).