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bigduckontax
bigduckontax, Accountant
Category: Tax
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Hello, i have a question about claiming against tax in a limited

Customer Question

Hello, i have a question about claiming against tax in a limited company,

when i buy things in a company, how is it "claimed" or tax deducted?

is it i get to claim 20% of what i buy?

if i have a tax bill of £100 can i use that money to buy a new asset and pay less tax?

i heard some things are 50% tax deductible and some are 150% !?
how does that work?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.

Hello, I am Keith and ready to assist you with your problems. It all depends upon what you are buying. If it is for capital items it is not tax deductible, but it may generate what are called capital allowances for tax purposes. This can be a highly complex area. If you are buying items as running costs then they become part of the expenditure of the company and, if allowable, reduce the profit level. With respect you seem to be confusing your personal expenditure and that of the company. We all buy things for our companies and charge them up and get a refund. These then go through the company's books at they would in any other business and don't affect your personal tax position. As for your quoted 50% and 150% tax deductibles you appear to be getting into the realms of capital allowances. Capital allowances are a complex area. I hope I am helping, please come back to me if you don't understand.

Customer: replied 3 years ago.

ill be honest! - i don't really understand tax.


I was not thinking in terms of personal tax, just company tax.


 


its just i hear people get excited about company purchases being tax free.


you must still have to spent the other 80% to buy it right?


 


say my profit is 100k and my tax is 20k


 


should i go out and buy a digger (assume 100% within allowance)for 70k and hope to pay only 6k tax on the 30k left?


 


i would feel better buying something that would help make more profit.


 


 

Expert:  bigduckontax replied 3 years ago.

Some capital items bought may well attract capital allowances at 100%. Some like cars for example, but not luxury cars, only attract a capital allowance of a percentage as a writing down allowance. Vans, however, would get the full whack. Indeed I know of a case where the Inland Revenue allowed a camper VAN as a van. I, like Victor Meldrew, couldn't believe it! Please wait; I will come back to you for your digger example. Here is the HMRC data on capital allowances: You will see that your surmise regarding the purchase of a digger is correct assuming Parliament implements the quarter of a million temporary AIA.

 

For 1/6 April 2008 to 31 March/5 April 2010From 1/6 April 2010From 1/6 April 2012
AIA£50,000£100,000£25,000
It has been announced (subject to legislation), that the maximum amount of AIA will be increased from £25,000 to £250,000 for a temporary period of two years in relation to expenditure incurred on or after 1 January 2013

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