Our website is made possible by displaying online advertisements to our visitors.
Please consider supporting us by disabling your ad blocker.
Results 1 to 6 of 6

Thread: CapEx and instalments

  1. #1

    Join Date
    Jan 2009
    Location
    Bristol
    Age
    45
    Posts
    3,487

    Default CapEx and instalments

    Interesting problem I've been trying to work out. The short version of the story is that I've earned too much this year in the disco business and it looks like a big chunk of my earnings are going to go to the Tax man (only fair).

    Personally, I'd prefer to bring forward some of my CapEx items from next year and reduce that liability a bit, so I've been trying to work out what to buy (that's the fun bit! ) In my searching I found a supplier (DJKit) who offer payment in instalments over 12 months, so my ideal situation would be to buy the kit now (which would reduce my tax liability), and then pay for it over the next 12 months.

    However - I was trying to work out what the rules are around paying for CapEx items in instalments - as it didn't sound to me like I'd be able to get the benefit now, and pay for it later. I found this on the HMRC website, but I don't know if anyone on here could help me clarify the rules?

    The way I read this was that if I buy something now on instalments, the payment becomes unconditional at the point I receive the goods, and I can then claim any payments made within the next 4 months as part of this tax year, and the remainder will fall into the next tax year. So for example, if I bought a pair of moving heads for £1k and paid £200 deposit and then 6 instalments of £133, I could offset the deposit of £200 and £533 of the instalments (4 months worth) against my profits for tax calculation purposes.

    Is this right?

    Julian
    http://www.bristoldiscohire.co.uk - Quality Disco and Equipment hire for Bristol & Bath
    Weddings, Birthday Parties, Kids Parties, School Disco's and more
    https://julianburr.co.uk - Wedding, Family, Portrait and Product Photography

  2. #2
    Vectis's Avatar
    Join Date
    Oct 2006
    Location
    Ascog
    Age
    56
    Posts
    9,492

    Default

    That's my understanding.

    Additionally, any interest charges are deductible but only in the relevant tax period.

  3. #3
    SC Events's Avatar
    Join Date
    May 2008
    Location
    Nuneaton, Warwickshire
    Age
    33
    Posts
    2,810

    Default

    Don't know enough about this sort of stuff to help you out.

    But, kit-wise, i've used http://www.djfinancedirect.co.uk/ to buy Pioneer CDJ's and everything is 0% interest.

    Most products are generally the same price as if you bought them from anywhere else and you're not paying 2/3% interest.
    Scott.



    SC Events | Facebook

    Professional Conference & AV Services, Corporate Entertainment, Equipment Hire and DJs

  4. #4

    Join Date
    Jun 2005
    Location
    Doncaster
    Posts
    814

    Default

    Not quite.

    Capital Expenditure accounting allows you to write down the value of a purchase over several years. So if you but say a new playout system for say £1,000, you can for example treat the first £500 as an expense in year one, £250 in year twoi and £250 in year three, thus spreading the cost over the life expectancy of the asset.

    Though the short shelf life of most electronic kit these days make this a short period, it is often just as easy to write off the whole cost of a piece of kit as a cost of sale.

    What you are proposing to do is to bring forward purchases from the next tax year into this but spread some of the cost back into the next tax year. All perfectly legal and quite normal.

    So, you but the kit for £1,000 as you say. Deposit of £200 and 4 monthly payments of £133, totalling £733, this can be treated as cost of sales in the current tax year with the remaining £266 accounted for in year 2. So, yes, you are right.

    This example assumes an interest rate of zero percent. If any interest is charged, you can still account for the interest as you pay it (probably by increased monthly repayments).

    Credit Card interest can also be treated as an expense too as can any late payment fees (though not recommended)!

  5. #5

    Join Date
    Jan 2009
    Location
    Bristol
    Age
    45
    Posts
    3,487

    Default

    Quote Originally Posted by mattydj50 View Post
    Not quite.

    Capital Expenditure accounting allows you to write down the value of a purchase over several years. So if you but say a new playout system for say £1,000, you can for example treat the first £500 as an expense in year one, £250 in year twoi and £250 in year three, thus spreading the cost over the life expectancy of the asset.
    Now I had a chat with my accountant about this yesterday as you used to HAVE to do this (the max claim in Yr1 used to be 50%), but apparently you can now claim up to 100% in year one for purchases up to £100k. The option is still there though to spread the tax gain over the life of the asset (e.g. 20% per year for 5yrs).

    Given the small size, cost and lifespan of my assets (ooer) I don't see the point in paying out for them in year one and then only getting the benefit in tax relief in years 2/3/4/5.

    Julian
    http://www.bristoldiscohire.co.uk - Quality Disco and Equipment hire for Bristol & Bath
    Weddings, Birthday Parties, Kids Parties, School Disco's and more
    https://julianburr.co.uk - Wedding, Family, Portrait and Product Photography

  6. #6
    Vectis's Avatar
    Join Date
    Oct 2006
    Location
    Ascog
    Age
    56
    Posts
    9,492

    Default

    Annual Investment Allowance was designed for things like plant and machinery but does equally apply to the tools of the trade for DJs - i.e. gear - and does allow you to write down a significant (for a mobile DJ) amount in the same year.

    There are some exceptions - IIRC vehicle purchase must still be written down conventionally over a period of time unless you intend to sell within the year, etc., and I'm sure there are others such as ?software? - if unsure then check with a pro.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •