Just testing the waters really on how and what you do...
Same Learner driver business, as discussed in other posts, has vehicles and office furniture plus IT equipment (namely iPads)
How would you depreciate these goods? Ive gone for:
Vehicle RB @30% PA NRV (as it fitted with dual controls, it will be hard to sell on)
Furniture SL @25% PA NRV
and IT SL @25% PA (now this is where im stuck.. they are going to have SOME residual value... but how much is the going price? dont know if i should use Moores Law (every 18 months chip speed doubles, therefore the cost decreases) Im just mega confused, is there an 'industry standard?
Can anyone help? :D
-- Edited by ClawzCTR on Wednesday 20th of June 2012 11:13:29 AM
I think i may have to have a chat to the client and pass him to my Accountant... :(
I get most of it, Annual Investment Allowance was 100k for 11-12; he's only spent about 10k for last year so the WDA is 20% on that (which is different to the depreciation charged to the accounts) once that falls below 1k, it can be writen off.
I really want to understand this as i dont want to have to keep passing off clients because i cant work it out... Am I along the right lines with what i said above Mark? (I know the WDA has changed this year to 18% and the AIA to 25k so I will have to make changes for anyone for this years returns)
-- Edited by ClawzCTR on Wednesday 20th of June 2012 02:04:03 PM
Dont spend any time trying to working out a depreciation method that is going to get you to the residual value at the end of useful life.
Just use the following
25% SL Vehicle
20% SL office furniture
33% SL IT
Any gain or loss when sold will be cleared out through the P&L.
At the end of the day depreciation is just an estimated allocation of cost over the useful life of the asset. Some you will get right, some will make a gain, some will make a loss.
All depreciation, gains/loss are disregarded anyway when doing the tax comp. Most important thing is to get the capital allowances correct.
Thanks Mark, yet again you've helped me out! ;) If we ever meet, i owe your a few drinks! lol
Been reading on Capital Allowances, are these worked out when the SATR is filled in? as i cant find any solid information about figures used etc etc... (the businesslink website although helpful, doesn't go into it much, as far as I can tell the only thing he can claim on the is the car, and the ipads, not the furniture... :/ Correct me if im wrong please.
Go to HMRC website. As there is information there.
Depending on what year you are doing any what they have spent should be able to get 100% AIA on all the fixed assets ie car, office equipment and IT equipment. You would need to double check re the car as normally you only get a % based on CO2 emission but expect that given is a driving instruction their car will be treated differently from the "normal" definition of a car.
Is the driving instructor a client? If so then you should revisit whether you have the knowledge to do the accounts and tax return if you are not sure of capital allowance on office equipment or when you do capital allowances comp
Sorry but think you need to pass it on as you would have just cost your client about £2300 extra tax based on what you have said. (assuming basic rate tax and 9% class 4 NIC due).
Would advise you go and do a course or some appropriate qualification re tax.
You said that they spent £10k and you were going to claim just 20% WDA ie £2k (20% x £10k).
What you should be claim is the full £10k as it is covered by the full £100k AIA for tax year 2011/12. AIA means you can claim up to 100% of the cost against tax for that year.
Therefore you would have claimed £8k less than you should have. Assuming 20% basic tax and 9% Class 4 NIC this increases the tax liability by £2320 (29% x £8k). You would also need to pay an extra £1160 payment on account (50% of £2320).
Strictly speaking you wouldnt have cost your client the £2300 as they would have got the tax relief in the future by claiming 20% WDA going forward on the reducing pool But it would have taken them 11 years to get the relief (assuming no changes to rates etc). Why wait to claim in the future when you can claim it now.
Why wait to claim in the future when you can claim it now.
If they have made a smaller profit than the cost of the car (excluding their personal allowance) then there is no point claiming AIA. You really will lose money that way.
I only ask as I bought things for myself and my business and I dont want to do that to me! :/
There's no substitute for study (though some might argue you learn more doing the job) but have you thought about purchasing tax software? You could speed up the process with a glance at an immediate tax result. One of the things I quite liked about taxcalc was the capital allowances module.
