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Charlotte Thompson

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 #1 
I bought some machinery for business use but I paid for it out of my personal account, shortly before my business was up and running, am I right in thinking that I can reimburse my personal account for the cost of the machinery from my business account..and now the machinery is an asset belonging to the company. Do I claim a capital allowance for it? Just a little bit confused.
Stewart McLean

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 #2 
Charlotte, one of the financial moderators would be best to advise you on this, but I can tell you that I've bought assets from myself in the past and it was all perfectly legal and above board. Make sure you send 'the business' an invoice from you and that there is a full description and for a fair price. The taxman will let most things go as long as they don't smell something fishy. So charging £1000 for your grannies teapot won't wash :-) just kidding!

Stewart

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Charlotte Thompson

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 #3 
Ah, thank you. So the receipt wont be sufficient.?

I use my car for work and pleasure, I buy petrol when im going to visit a customer or shop for materials so I pay for it on the business account, do I need to record mileage as well? Im a bit confused how the whole car thing works, Ive had the car many years and isn't an asset of the company but I just use it for work.

Also, im using Quickfile as suggested on the HMRC website, do I still need an accountant?
Stewart McLean

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 #4 
Charlotte, vehicles and mileage can be a bit of a minefield so I'll ask one of the finance guys to look in on this.

Stewart

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John Alcock

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 #5 
Hi Charlotte

I am responding to your enquiry about taxation allowances for motor expenses.

You have 2 choices when claiming motoring expenses as a business expenses:
1) You can claim 45p per mile for all mileage done for business purposes - this is to cover all motor expenses so you would need to keep a record of where you have been on business and the mileage
or
2) You can claim the actual costs of running the vehicle but if you are using the car for personal use as well you can only claim a proportion of these costs.
You have to decide how much of the car is being used for personal and how much for business use - it is usually 50%. So if your total costs - petrol, road tax, insurance repairs etc were say £2000 you could just claim £1000.

If you are doing lots of miles on business it is usually better to claim via option 1.

You can claim a depreciation allowance for the value of the car. So you have to decide as at the 5 April the value of the car - so if it was £3000 then the applicable value for tax purposes would be 50% of that - £1500. You can then claim 20% of that figure as a Capital Allowance (Depreciation).

You also queried machinery costs. You can claim 100% of the purchase cost up to £250,000 worth of machinery purchase in any tax year ( even going back 2 years so if you bought it before you started you can still claim it as an expense).

If you would prefer to discus these issues by phone my mobile is 07817 654345

John Alcock
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Paul Clifton

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 #6 

Hi Charlotte

 

My name is Paul Clifton. I'm a Chartered Certified Accountant and work for myself as an Accountant operating in North Leeds and help smaller businesses and their owners with their accounts, business and taxation. I'm one of the moderators and have been asked by Stewart to comment on your questions.

 

People think that they need receipts and proof of purchase to claim a business cost. This is not what the law says. You just have to demonstrate that you’ve bought the item. Even a gift to you of an asset, e.g. a computer, that you bring into the business, can be claimed as a business cost at its cost to the person giving it to you.

 

I’m assuming that you are a sole trader (i.e. not a limited company). It does not matter if you used the ‘business’ or ‘private’ bank account. It’s all the same from a tax viewpoint. There’s no need to reimburse yourself. It may be helpful for all business costs to go through a single business bank account so they are all in one place, which makes recordkeeping and accounts and Tax Returns easier at the year end.

 

With respect to cars & mileage, as John has indicated, you have two choices.

  1. Claim 45p per business miles (up to 10,000 miles per tax year). After 10,000 miles in the tax year, if you do that much, then you claim 25p per mile. Start again each tax year (5 April) with the 10,000 counter

  2. Add up all the ‘costs’ of running the car each year and claim the business percentage. Cost = fuel, repairs, road tax & insurance. Included in the ‘costs’ each year will be part of the cost of the car. You do not claim all the cost of the car in the first year. You have to claim tax deprecation (i.e. capital allowances) over a number of years. You either claim 10% or 20% of the market value of the car when first used into the business as your capital allowances / tax depreciation. The rate depends on the CO2 emissions of the car. If over 160 grams of CO2 you claim 10% else 20%

 

You need to keep a mileage log for both, obviously more detailed for the first. For the second you are just trying to calculate the business percentage.

 

You also need to differential business and private mileage. This split is not always obvious and depends where you work and are based.

 

All of the above is something that your accountant should be guiding you with. I help businesses like yours every day with these types of questions. I have been appointed account for a few businesses that Stewart has asked me to help out.

 

Whilst you are trying, rightly, to understand, your accountant should be a good place to talk these issues through with. There are lots of pit falls in not getting correct advice. Advice on issues like this is not complex for a high street accountant and need not be expensive.

 

If you would like to discuss this or similar questions with me then please phone me on 0113 225 2232 or email me at paul@all-paul.co.uk

 

I’m happy to meet with you and give you an hour’s free advice on all these start up issues if you are thinking of appointing an accountant and would consider me.

 

I have a few help sheets on matters like this. If you send me your email address, I’ll forward you one. Please do feel free to telephone me. It sounds like as well as these replies that you need an accountant anyway.

Stewart McLean

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 #7 
Thanks John and Paul.

Charlotte, I hope that has cleared a few things up for you.

It looks like I can stop buying things from myself huh? [smile]

Stewart

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Jim Lockyer

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 #8 
Quote:
Originally Posted by Paul Clifton
  1. Claim 45p per business miles (up to 10,000 miles per tax year). After 10,000 miles in the tax year, if you do that much, then you claim 25p per mile. Start again each tax year (5 April) with the 10,000 counter

  2. Add up all the ‘costs’ of running the car each year and claim the business percentage. Cost = fuel, repairs, road tax & insurance. Included in the ‘costs’ each year will be part of the cost of the car. You do not claim all the cost of the car in the first year. You have to claim tax deprecation (i.e. capital allowances) over a number of years. You either claim 10% or 20% of the market value of the car when first used into the business as your capital allowances / tax depreciation. The rate depends on the CO2 emissions of the car. If over 160 grams of CO2 you claim 10% else 20%



Might be worth noting that if your car is older and more likely to need a couple of high cost items on it, option 2 might be more cost effective.

By my sums from last year you can afford to have one high cost repair on your car under the 45p/mile scheme - eg a new clutch, but you might be a little out of pocket if you needed a new clutch and getting your brakes overhauled.

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