What should be recorded under Annual Investment Allowance rather than Expenses?

[lisbet]

As I understand it, small 'consumable' items such as paint, as well as toys, get recorded as expenses, and 'equipment' (big, expensive purchases?) is recorded under Annual Investment Allowance.

So, I am going to put the £89.99 Little Tikes climbing frame and the £100 Expedit shelving under AIA. But what about other things that aren't toys, but aren't big, expensive items - do they count as expenses or AIA? Here are a few of the items that I am dithering over:

A new set of pushchair wheels (£50)
A pushchair basket (£20)

Tableware such as plastic plates, Tommee Tippee lidded cups, bibs and so on... (Each item a couple of £ or thereabouts)

What would you list the above items under? :blush:

[moggy]

As I understand it, small 'consumable' items such as paint, as well as toys, get recorded as expenses, and 'equipment' (big, expensive purchases?) is recorded under Annual Investment Allowance.

So, I am going to put the £89.99 Little Tikes climbing frame and the £100 Expedit shelving under AIA. But what about other things that aren't toys, but aren't big, expensive items - do they count as expenses or AIA? Here are a few of the items that I am dithering over:

A new set of pushchair wheels (£50)
A pushchair basket (£20)

Tableware such as plastic plates, Tommee Tippee lidded cups, bibs and so on... (Each item a couple of £ or thereabouts)

What would you list the above items under? :blush:

I am no expert but all those things you mention I would put as normal expenses. £100 really is not a lot of money in accounts/tax terms. An annual entrance ticket to somewhere would cost over that and that is a normal expense.

Big expensive stuff I would say is £1000+

But don't quote me on it!

[lisbet]

I am no expert but all those things you mention I would put as normal expenses. £100 really is not a lot of money in accounts/tax terms. An annual entrance ticket to somewhere would cost over that and that is a normal expense.

Big expensive stuff I would say is £1000+

But don't quote me on it!

Thanks for the reply.

It is the HMRC document - in post 8 of the thread below - that is making me unsure what to put down as AIA rather than expenses. The relevant bit is from halfway down page 9 onwards. They say that 'equipment' can't be down as expenses and give the example of a £90 stairgate as something that should be put down against AIA.

It's confusing me, because they do allow toys as expenses and I think that really toys ARE childminding equipment! :huh:

http://www.childmindinghelp.co.uk/forum/book-keeping-accounts-tax-expenses-national-insurance/2697-tax-information-help.html

[moggy]

Well, I have never used this but I have not bought very big/expensive stuff really...
I think it is to do with making sure you are within the limit of these Capital Allowances (£250 000!) and that you make an adjustment if you sell them...

More info here:

HMRC www.hmrc.gov.uk/helpsheets/hs252.pdf




What are capital allowances and balancing charges?
In working out your business profits you should not deduct the cost, that is, the
expenditure incurred, of buying or improving items such as a car, equipment
or other tools that you use in your business or the depreciation or any other
losses which arise when you sell them. Instead, you can claim tax allowances
called capital allowances. These are deducted from your profit to arrive at your
taxable profits, or added to your losses to arrive at allowable losses.
Generally, anything you use that has a useful economic life of at least two
years may qualify for capital allowances.

Useful economic life...? Do children/safety equipment have a useful economic life?

I hope someone who knows more about this than me comes along!

[natlou82]

I'm watching with interest as my pc is on the blink and it looks like I'm going to replace it with a new laptop. The only personal thing I use it for is storing photos otherwise it's all CM related. Does anyone know if I can claim anything on this? And under which category?

[lisbet]

Thanks Moggy, that makes sense...I think! I wonder whether useful economic life means it will last for two years, or it will hold it's value should you resell after two or more years?

I'll make a best guess this year, since there's nothing over £100 anyway, and make a note to ask HMRC in the near future.

[moggy]

Thanks Moggy, that makes sense...I think! I wonder whether useful economic life means it will last for two years, or it will hold it's value should you resell after two or more years?

I'll make a best guess this year, since there's nothing over £100 anyway, and make a note to ask HMRC in the near future.

Yes, either way you do it it still gets deducted from income to calculate profit.
If you ask HMRC, can you let us know what they say? Thanks.

[lisbet]

Yes, either way you do it it still gets deducted from income to calculate profit.
If you ask HMRC, can you let us know what they say? Thanks.

Will do. Thanks for helping with tax stuff on a Saturday night! :)

[Kiddleywinks]

Equipment doesn't necessarily mean BIG or EXPENSIVE - equipment is whatever we need to do the job....

Ikea cups plates cutlery etc that I purchased last year will go down as AIA as I expect them to last more than 12 months from when I purchased them - they didn't cost more than £100
I will also be claiming as AIA all the storage units, and trays, again, each unit when purchased, was less than £100

Stairgates I've put down as AIA - because they are equipment I expect to use for years to come, although I think so far I've used only 1 of the 3 I own, and that was only for about a month lol
My laptop went under AIA - well, 70% of the cost did - the other 30% is personal use

I look at consumables as things that are going to or are likely to require replacing day by day, week by week, year on year. (Toys I feel come into this category - it is generally expected that toys will get broke and need replacing regularly when being used by a multitude of children ;))

Anything likely to not be replaced until over the year mark I put down as AIA as it is then an investment in my business expected to 'help' for more than a year.

HTH :thumbsup:

[Simona]

Quite a few confusing messages here on the subject of Capital Allowance...CA is not new but CMs need to know what they are doing when claiming for this...be careful and know your stuff!!

If unsure consult an accountant...they know how it works....we are a small business and CA is allowed but within a limit

Hope this helps

[Kiddleywinks]

Capital Allowance is different to Annual Investment Allowance......

[Chatterbox Childcare]

Quite a few confusing messages here on the subject of Capital Allowance...CA is not new but CMs need to know what they are doing when claiming for this...be careful and know your stuff!!

If unsure consult an accountant...they know how it works....we are a small business and CA is allowed but within a limit

Hope this helps

The thread is about AIA not CA

[Simona]

Yes there is a difference and that is why I suggested getting professional advice ...on both and how it works for a CM.

[JCrakers]

Ive been doing my expenses for 7.5 yrs now and Ive never heard of AIA.... oops :blush:

Am I doing something wrong?

I purchased a PC last year because without it I cant do my job....I just put it down as expenses.

[Simona]

This is the information from the gov.uk website
It mentions Capital allowance as well as AIA


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

Hope it helps

[moggy]

Thanks, Simona. That link had lead me to what seem to answer all of these issues... we do not need to deal with CA or AIA as we can use 'cash basis' as our income is less that £81000 pa.

See:https://www.gov.uk/simpler-income-tax-cash-basis/overview
I suggest you read all the sections in this link as it covers it all.

For Cash basis accounts, it says...


Expenses
Expenses are business costs you can deduct from your income to calculate your taxable profit. In practice, this means your allowable expenses reduce your Income Tax.

You only count the expenses you’ve actually paid. Money you owe isn’t counted until you pay it.

Examples of allowable business expenses if you’re using cash basis are:

day to day running costs, eg electricity, fuel
admin costs, eg stationery
things you buy to sell on, eg stock
things you use in your business, eg machinery, computers, vans
interest and charges up to £500, eg interest on bank overdrafts

So all the equipment we buy goes down as an expense as we are doing 'cash basis'.
Phew, I can carry on as I was.

[natlou82]

Brilliant thanks for the fantastic link Simona :-)

[Simona]

Brilliant thanks for the fantastic link Simona :-)

Thanks to Moggy too for her link...all very useful for those who do their own Tax return...worth reading them bot and even saving them to refer to if necessary :thumbsup:

[natlou82]

Yes definitely both worth a save, no need for any of us to get in a flap - unless we re earning over £81k of course :-D

[JCrakers]

Yes definitely both worth a save, no need for any of us to get in a flap - unless we re earning over £81k of course :-D

Well, a lot of parents seem to think we're raking it in......

[loocyloo]

Well, a lot of parents seem to think we're raking it in......

my own mother seems to think I am earning a fortune !!! I was explaining to her that I had had to explain to DD that I really couldn't take the day off to accompany her school band to a competition ( but I am planning on going to listen with the LOs ) as I would lose £150 for the days work ( its my busiest and longest day ) and I really couldn't afford to. ( DD fine with it ) and mum kept going on about how much I must earn ... so I did the 'pointing out that I then pay tax on it and pay for all my resources, gas/electric/water, food etc' and she still kept on about how much I earn! you know when you think 'why did I start this conversation?' !!! :rolleyes:


but I'm glad to read that as I use the 'cash basis' I can carry on with my expenses as they are! I was getting rather confused reading everything else!

[Simona]

Yes...and that is why I suggested getting professional advice if unsure or Cms can get confused.
hopefully this is now cleared.
I have my accounts done by an accountant and every year I declare any equipment above a certain amount...so far no issues and have done so for 22 years.

We are offering suggestions here and support but we are not qualified accountants...the same accountants are not qualified to understand the ins and outs of EYFS, regulation and legislation that bind us all...each has his/her own field of expertise!

On the subject of parents thinking we are 'raking it in'...I do feel parents have no right to make such assumptions in the same way we do not assume what their earnings are...if Cms do earn a lot so what is the problem if they are working hard to earn their money?

it is a question of mutual respect in my view !