Buying a computer and UK tax law
Hi guys, I'm hoping that somebody here might have some experience of this...
I'm about to start up my own business, but I'd like to purchase a computer and various other bits and bobs for said business before it's officially up and running.
I'd like to make sure that I get the full tax benefits, but I've been warned that you can't just 'buy' equipment for the business, because if the business doesn't have the cash there in the first place you are effectivey "gifting" the equipment to the business.
Also, my parents are wanting to give me a little money just to get me started. Am I better to say that this money is a loan so I don't get shafted for tax?
I'm about to start up my own business, but I'd like to purchase a computer and various other bits and bobs for said business before it's officially up and running.
I'd like to make sure that I get the full tax benefits, but I've been warned that you can't just 'buy' equipment for the business, because if the business doesn't have the cash there in the first place you are effectivey "gifting" the equipment to the business.
Also, my parents are wanting to give me a little money just to get me started. Am I better to say that this money is a loan so I don't get shafted for tax?
Comments
Originally posted by Messiah
Hi guys, I'm hoping that somebody here might have some experience of this...
I'm about to start up my own business, but I'd like to purchase a computer and various other bits and bobs for said business before it's officially up and running.
I'd like to make sure that I get the full tax benefits, but I've been warned that you can't just 'buy' equipment for the business, because if the business doesn't have the cash there in the first place you are effectivey "gifting" the equipment to the business.
Also, my parents are wanting to give me a little money just to get me started. Am I better to say that this money is a loan so I don't get shafted for tax?
You might need to check online at a couple of places. UK Inland Revenue and Customs and Excise.
Registering for VAT is the best deal for saving some cash!
You get to claim back (every quarter) the VAT you have spent on legitimate biz expenses. ie Computers/phone bills/ink/paper/iPods?/etc.
This also works retrospectively. If you need to use any equipment that may have been purchased before you register for VAT you can still claim...there is a time limit on this...you will need to check it out.
I am a little more unsure 'bout the income tax side but I think that hardware purchases are tax deductable....but split over a number of years. ie 25% of the value can be claimed against tax each year (if it's 4 years)
Sorry if I am totally wrong. Good luck!
Originally posted by Messiah
I'd like to make sure that I get the full tax benefits, but I've been warned that you can't just 'buy' equipment for the business, because if the business doesn't have the cash there in the first place you are effectivey "gifting" the equipment to the business.
That's OK as long as you bought it with your own money - tax has already been paid on that money. Buying kit with company money, reclaiming the VAT and giving it to yourself to play games on would cause trouble (i.e. the otehr way around).
Also, my parents are wanting to give me a little money just to get me started. Am I better to say that this money is a loan so I don't get shafted for tax?
You could give them some shares in the company and they'd have made an investment...
Probably best if you don't want to go that way is to make it a loan. It means you're making a loss from the very start, but you won't pay corporation tax on the profits that were actually a gift.
Of course, if you've spent it all before the year end, it doesn't matter, you only pay tax on the profits at year end.
HTH,
Cheers,
Martin.