Computer through expenses

[hayley285]

Hello,

I hope I have not missed this somewhere but am looking at purchasing a computer to put children's software on as am amazed at how my little man enjoys using one and feel the minded ones would enjoy it too. Would I be able to put this through my expenses as hubby will not let them use his - don't blame him either.

:)

[Chatterbox Childcare]

If it is all for childminding, children or you, you can claim the lot as one expense or depreciate it.

Debbie

[sarah707]

Capital expenditure is a tricky one... you cannot just put the whole amount through I'm afraid. :(

This was posted by Berkschick a while ago from her tax notes - I hope you find it useful :D

Certain equipment cannot be claimed as an expense. Relief is given for wear and tear in the form of capital allowances over a number of years. Capital expenditure needs to be recorded separately from other day to day running costs. Capital expenditure covers anything deemed to be an asset to the business, usually something that has a re-sale value. This tends to be larger items such as a computer, printer, cots, pushchairs, etc.

To calculate capital expenses, you need to record
1, What was bought
2, Date and cost of purchase
3, Proportion of business use
4, Any items sold
5, Date and amounts received if sold

Most equipment attracts a first year allowance (FYA).

FYA works like this.

You buy a computer for £500. FYA on this would be £250 and the residual value would be the remaining £250. The following year you can claim a further 25% of the remaining £250 which would be £62.50. The following year you can claim a further 25% of the remaining amount which would be £46.87 and so on until the item is sold or replaced.

FYA are apportioned for private use.

[louised]

Taken from the NCMA Members handbook:

As a business you have the option of claiming a tax allowance called capital allowances on certain purchases. These would usually be expensive items, or those which have a lasting value and are used over a number of years - for example a car or personal computer.

Capital allowances work by letting you deduct a proportion of the costs of an item from your taxable profits (unlike expenses where you would claim the total cost of an item). Some childminders find it helpful to claim capital allowances for large items because this allows you to deduct a significant amount from the taxable profits for a number of years. This makes it likely that they will reduce the amount of tax they pay for several years rather than claiming the cost all at once as expenses and "using up" the amount they can deduct from their taxable profit in one financial year.

It's your decision whether or not to claim capital allowances rather than direct expenses for some items that you by as part of your business. You do not have to claim capital allowances for any item if you choose not to.

I have previously bought a laptop for my childminding business and claimed it as an expense as I was close the tax threshold and needed to bring my taxable profit down. So it's really up to you how you want to do it.

[sarah707]

Louise's reply seems to suggest that the rules have changed since the original post on this subject.

The best thing for you would be to contact the tax office and ask their advice... here are the contact details.

http://search2.hmrc.gov.uk/kbroker/hmrc/contactus/start.jsp

Please let us know what they say!