Computer Tax allowance ends

[FTSE Beater]

Hi all

I've just received a letter form my parents accountant to say that the 100% tax allowance on computers is coming to an end by the end of this month, and it doesn't look like it's going to be renewed in the budget. So I would get any computer related stuff in this tax year to get the full tax benefit.

HTH

 

[DanielLambert]

Does it make a difference if you trade as a sole trader or a small business whether the allowance applies?

 

[FTSE Beater]

Hi DanielLambert

Nope, no difference. If you claim back trading / computer expenses to offset against profits, then from April, you will probably have to pay the full whack

 

[DanielLambert]

so will u be able to claim for the year 2002/03 that will end on 6th April? We wont get self assessment forms til after 6th April

 

[fowkesp]

The first year capital allowance for computer equipment reverts from 100% (ie you can offset the whole price against profits) down to the normal 40% on 31st March. After that you only be able to claim 40% of the capital cost against profits and you will have to use writing down allowances for the following years to recover the rest.

The Chancellor temporarily upped it to 100% a few years ago to encourage investment in computer and related equipment. I know I've taken advantage of it - lots of lovely PCs, TFT screens broadband, routers etc.

 

[DanielLambert]

sorry if I am being stupid.....

but any IT equipment I have bought before 31st March 2003 , I will be able to claim 100% when I complete my self assessment for the yr ending 6th April 2003. Correct?

 

[fowkesp]

DanielLambert,

I was talking from the perspective of my Limited Company, which is both a Technical Consultancy and Futures trader. The same rules would apply to the self-employed, but I'm not sure about an individual, which is what you appear to be. In order to use the allowances I believe you need to be carrying on a trade of some sort in the eyes of the Inland Revenue. Don't forget you can be both employed (eg your full-time job) and self-employed (eg financial trader) at the same time and be taxed separately on each activity.

You are best off speaking to an accountant if you are unsure, or even ringing your local Inland Revenue office for advice (anonymously, of course).

Paul

 

[FTSE Beater]

sorry if I am being stupid.....

but any IT equipment I have bought before 31st March 2003 , I will be able to claim 100% when I complete my self assessment for the yr ending 6th April 2003. Correct?

Correct

 

[DaveJB]

Err, before you spend it all Daniel -
I think you'll need to be a company. I THINK the deal is that if you are a limited company (not sure about sole trader, I only know my own case) you get 100% tax relief this year - I was under the impression you also needed to be in year 1 of existence as a company... sorry I can't be sure, but having qualified I didn't check to hard on who was left out
As an individual I think you're snookered though. The version I got is it's a sort of incentive to invest in IT in year 1 for companies, who normally get to write costs off over (3?) years - a bit like taper relief. This is, I believe, a 2003 one off... try phoning the tax man, I've always found them very helpful, oddly enough!

 

[fowkesp]

Agree with your comments DaveJB. It will be best to check things through with an accountant Daniel, otherwise you could be in trouble later. I would guess you need to claim that you are self-employed (sole-trader) and running a trading business before you could get the allowances. An accountant could advise of how to go about this without being challenged by the IR.

I got confused by first year allowances years ago as well. The "first year" bit refers to the fact that capital allowances are normally higher in the year you purchase an item, reducing to a lower rate for later years. So it doesn't refer to the first year your company is in operation, but rather the allowance available in the year you first purchase something.