[colley614]

All this claiming of 50% here and there and stuff is really going to get me though because I have bought loads of stuff this year a car, full trad set up, basic water fed set up, uniform, web site to name but a few. I'm hoping that with everything in mind I don't owe much out at all this year but then I can't expect to pay buttons out and get a nice lump sum.
When speaking to my accountant I was hoping to lease a van next year and buying a van mount system to go in it.

[macmac]

There are more catagories than just consumables & equipment though, advertising, clothing & vehicles may well have differing percentage rules.

tony

[Village Gleam]

Clothing and advertising full cost. vehicles as a seprate asset as in first post.

There is a business helpline you can ring, which at some point I will, but I want to  sort out exactly what specific questions I need to ask.

What i am trying to understand is that direct costs are very low, so there is a large gross profit. (unlike other businesses where you buy stock and this is your largest expense.)

[williamx]

I have been on a course which the Inland Revenue offer and run.

Its totally free and takes about 5 hours, telephone your local tax office or go to their web page for more details.

I would recomend this even if you are using a accountant, because the less work a accountant does the less you pay.

What is tax deductable and what is not and how much you can claim is quite simple.

If you have had to spend money to run your business, then this is tax allowable, if you already spend this even without a business then its not allowable.  For example you rent you home and run your business from there, bacause you would have to live there anyway the rent is not allowable but other household expenses are.

Any capital expense over £200 like equipment-vechicles-computers you can claim 50% in the 1st year then 25% per year thereafter until you have claimed the total cost back, if you see the item then this figuure must be taken away from the cost and the rest is what you can claim for, if you make a profit on something you sell then you have to pay tax on this profit.

If you lease a vechicle or equipment then you can claim 100%.

You can claim for the use of a room in you home, if you can prove that its only used for the business, so if you use a bedroom, there must not be any type of bedroom furniture in it, you can only claim a percentage of your Council Tax - Gas - Electric, you cannot claim for rent or mortgage because you would have had to pay for this even if you werent in business.

The percentage you can claim is as follows, you count the total rooms in you house but not the kitchen bathroom or hallways, so if you live in a 3 bedrrom house with 1 livingroom and use 1 bedroom for business you can claim 25%.

If you use only part of the livingroom or garage then you can only claim a nominal amount of £2.00 per week.

If you use your home phone then you will have to show the call costs you have used for the business, you cannot claim for line rental unless the phone is only used for the business.

You can claim for working clothes but you cannot claim for suits and smart dress.

You can claim for gifts to your customers so long as its only £50.00 per customer per year.

You cannot claim for business lunches or drinks, but you can claim for hotel and food if you are away on business. (proof will be required)

It is worthwhile to have an accountant as the tax rules change every year and they will save you more than their costs in most cases.

It is also worthwhile to join the Ferderation of Small Businesses because they offer an insurance policy as part of their membership that covers your cost if you have a tax investigation, which can be very very expensive.

Remember to kept every bill-every bank statement-every weekly income sheet, you will need to kept this information for 6 years, so look after it like gold.

[Moderator David@stives]

William

excellent post !!

Dave

[colley614]

William, spot on mate. Sounds like you listened on that course then!

[Village Gleam]

How long ago did you go on the course?
I'm pretty sure computers or computer related is full cost of purchase in same year less an adjustement for personal use.And you can't claim the cost of a vehicle back, only depreciation.

What makes our business different, in my opinion, is that a lot of our costs seem to have to do with depreciation and overheadss and we have very few direct costs.

I'm surprised that your course didn't mention the asset pool.

A lot seems to go on what is reasonable and being consistent, so if we both had the same figures and presented them in a different way  this would be okay, as far as I can gather.

[Ian Rochester]

I would always recommend that you get a real accountant to sort your year end accounts for you, if they are worth their salt they will save you more money than they cost you.

[Village Gleam]

No need to get snappy. I just wondered if anyone on here had got it sussed, and I started by saying what I had found out hoping people could add to it.

And there are reasons other than tax to do a profit and loss account.

[williamx]

I went on one course on the 3 September 2007 and then another one on the 10 September 2007, I am waiting for dates for further ones I'm interested in.

As for vechicles costs.

You have 2 choices when it comes to working out your vechicle costs

The first is The Mileage Rate method

With this one all you can claim is 40p per mile for the first 4000 miles then 25p per mile thereafter.

The second one is Actual cost method

With this you can claim all of your motoring expenses
Insurance
Road Fund Licence
Repairs/servicing
Parts
Fuel/oil
AA - Rac or other subscription
MOT

Vechicle

You can only claim 50% in the 1st year then 25% per year thereafter.

You can claim 100% if your vechicle is a low Co2 emissions car (no more than 120gm per km driven)

You also have to kept a mileage record and any personel mileage is to be taken away.

Example

Business miles travelled in the year = 6000
Total miles travelled in the year  = 12500
% costs relating to business use  = 100x6000/12500  =48%

Total motoring cost for year  = £4000
(Proportation of costs alloable is £4000 x 48%)  = £1920
Disallowable costs (£4000 - £1920)  = £2080

You can also claim Capital alloances, but these are restricted to the business proportion (c%)
                                                                     
Remember which ever way you go, means you have to stay on that tariff untill you replace the vechicle, so for those who are on their 1st year trading or have aquired a vechicle, wait untill April 4 2008 to decide which method you want to use.

[Village Gleam]

When you claim the vehicle cost say it was 10k plus vat. Are you working on the 10k or the full cost?

[williamx]

When you claim the vehicle cost say it was 10k plus vat. Are you working on the 10k or the full cost?

You work on the full figure which is £11750, if you are vat registed then you can claim the vat back.

[Village Gleam]

I bought my vehicle this year but it's not new. Am I 25% or 50%?

[williamx]

50% unless you use the Mileage Method then its 0%

[dave0123]

Willamx,

Any capital expense over £200 like equipment-vechicles-computers you can claim 50% in the 1st year then 25% per year thereafter until you have claimed the total cost back,

So does that mean anything under £200 i can claim 100% ? for example if i went and bought ermm i dont no a new A ladder for £90.00?

Dave

[williamx]

The inland revenue will allow you to claim 100% on anything you buy under £200, anything over is then claimed on 50% first year allowance, then 25% on writing down allowance until you have claim the total cost back.

Example
If you buy say a pole at £1000.00

Your first years allowance will be = £500.00

Yours 2nd year writing down allowance will be £500.00 x 25% = £125

Your 3rd Year writing down allowance will be £500 - £125 = £375.00 x 25% = £93.75

Your 4th year writing down allowance will be £375.00 - £93.75 = £281.25 x 25% = £70.31

Your 5th year writing down allowance will be  £281.25 - £70.31 = £210.94 x 25% = £52.73

Your 6th year writing down allowance will be £210.94 - £52.73 = £158.21 ( this is because the figure has come under the £200.00 theshold)

Now if the pole which you brought for £1000.00 breaks and cannot be repaired or replaced then you can claim 100%

[Village Gleam]

And what about this asset pool that I am going on about, where all such items are grouped together, apart from vehicles which are done seperately?

[williamx]

Sorry never heard of it, but on your tax return form, under the self employment section, there are several boxes (boxes 3.14-3.16-3.18-3.20 with box 3.22 for the total figure) for capital allowances.

Maybe this is your assets pool?

It does state that separate calculations must be made for each block of expenditure.

So in box 3.22 you would put the total figure of capital expeniture you have incrured, but you must a a seperate copy which shows the breakdown of this figure in case they ask.

When you are filling in your self employment form after 5 April 2008 for the previous years accounts, you can telephone their helpline number 0845 302 1437 and get a step by step help on filling in the form correctly.

[Paul Coleman]

I have been on a course which the Inland Revenue offer and run.

Its totally free and takes about 5 hours, telephone your local tax office or go to their web page for more details.

I would recomend this even if you are using a accountant, because the less work a accountant does the less you pay.

What is tax deductable and what is not and how much you can claim is quite simple.

If you have had to spend money to run your business, then this is tax allowable, if you already spend this even without a business then its not allowable.  For example you rent you home and run your business from there, bacause you would have to live there anyway the rent is not allowable but other household expenses are.

Any capital expense over £200 like equipment-vechicles-computers you can claim 50% in the 1st year then 25% per year thereafter until you have claimed the total cost back, if you see the item then this figuure must be taken away from the cost and the rest is what you can claim for, if you make a profit on something you sell then you have to pay tax on this profit.

If you lease a vechicle or equipment then you can claim 100%.

You can claim for the use of a room in you home, if you can prove that its only used for the business, so if you use a bedroom, there must not be any type of bedroom furniture in it, you can only claim a percentage of your Council Tax - Gas - Electric, you cannot claim for rent or mortgage because you would have had to pay for this even if you werent in business.

The percentage you can claim is as follows, you count the total rooms in you house but not the kitchen bathroom or hallways, so if you live in a 3 bedrrom house with 1 livingroom and use 1 bedroom for business you can claim 25%.

If you use only part of the livingroom or garage then you can only claim a nominal amount of £2.00 per week.

If you use your home phone then you will have to show the call costs you have used for the business, you cannot claim for line rental unless the phone is only used for the business.

You can claim for working clothes but you cannot claim for suits and smart dress.

You can claim for gifts to your customers so long as its only £50.00 per customer per year.

You cannot claim for business lunches or drinks, but you can claim for hotel and food if you are away on business. (proof will be required)

It is worthwhile to have an accountant as the tax rules change every year and they will save you more than their costs in most cases.

It is also worthwhile to join the Ferderation of Small Businesses because they offer an insurance policy as part of their membership that covers your cost if you have a tax investigation, which can be very very expensive.

Remember to kept every bill-every bank statement-every weekly income sheet, you will need to kept this information for 6 years, so look after it like gold.

That was a good read William.
The bit about not being able to claim a portion of telephone line rental surprised me.  I thought it was apportioned in the same way as call charges.
Also, not wanting to seem picky but my accountant told me to keep records for seven years rather than the six you mention.  He said this is because it's actually six years plus the one you are currently working.

[williamx]

I personally would kept the recors for 7 years myself but the tax people said its was 6 years.

As for the telphone line charge, providing the phone has only been used for the business and not personel calls then you can claim the cost of the line rental, if you use you private number as a business contact number then you can't.

The taxsman general principle is that all costs, which are actually incured for the sole purpose of earning business profits, and excluding all personeal allowances, are allowable.