04/05 tax return

Was this "other purpose" a business? If so, and you chose not to bother claiming capital allowances for the equipment in that business before transferring it into the current business, then you could probably treat the equipment as introduced at its original purchase cost. If not, i.e. the purpose was private, it might be more honest to introduce it at market value.

You don't "account for depreciation" at all, except for your own internal purposes if you wish. For tax purposes, you claim capital allowances instead. You refer to them below as depreciation allowances and you may like to think of them as being just that, however, the correct name for them is capital allowances.

As discussed above, either £2000 or any reasonable market value figure. The former would of course be better for you, assuming you have taxable profit against which it makes sense to set these allowances.

Not sure. I suspect FYA on computing stuff (40%) are only available if the equipment was bought new in the year of claim. This would mean you could only claim 25% CA. And then 25% of 75% next year and so on.

I don't think the small earnings exception is pro-rated, and so that would mean that provided the earnings in the tax year were below it, you would not be required to pay class 2 NI. But it doesn't necessarily mean you'd be exempted from notifying IR of your SE status.

Hi Ronald,

Thanks for the resp>

'twas for personal use. Question is...if I were to be more honest and go with market value, how do I ascertain this at this point (some 12-18 months later)?

okeydoke...I'll make a mental note not to try not to confuse terminology.

Does anyone have a definitive on this?...or is it much like most of the rest of the tax system where no definitive answer exists i.e. it's just down to testing the boundaries on a case by case basis?

Cheers.

Thanks. I'm not looking for a way out, just a handle on the size of the underpayment.

cheers RM

Make something up which is reasonable. One could be brutally over-honest and say that IT kit depreciates like billy-oh in real life, and would probably only be worth a third after more than a year. But so long as it's in year 2 of its life, 75% should not be unreasonable, i.e. the same as if you had applied 25% CA to it in year 1.

Unfortunately C2NI is all or nothing, i.e. if not excepted, you'd pay £2 per week from when you "started working for yourself", i.e. about £52 for half of 03/04, plus about £107 for all of 04/05, plus the fine if you don't get let off.

yup...that's what I thought you might suggest - I just didn't want to prejudge the situation myself.

Absolutely...it was more a matter of whether or not there was NI to pay at all for the 03/04 year. I'll be hit with a fine anyway as I *still* haven't declared myself for NI (naughty me) - being a bit of a numpty I had just assumed that it would be sorted with the first tax return but, of course, that only talks about the additional class 4 NI. Now, of course, I know there is a 3 month deadline to declare your self-employed status from the day you start earning income on a self-employed basis and that class 2 NI is payable either quarterly or monthly by direct debit. We all learn from our mistakes...

thanks, RM

I don't believe that HMIT will let one transfer a second-hand, two year old computer at the 'new' price.

tim

Do you mean only if transferred from private use to business use?

My thinking in the case of transfer from one business to another is that it ought to be transferrable at its proper WDV. If the first business chose not to claim CA in the year of acquisition (typically because it would not have led to a reduced tax bill), they can instead claim the first tranche of CA in any later year, so its WDV remains at 100% until that happens. Why should it not be transferrable to another business on the same basis, especially where that business is the same proprietor's?

I suppose so. The OP just said 'another purpose', he didn't say another business.

Don't the businesses have to be realated?

AIUI, i I start up as an one (SE) business and make a loss, I can't use that loss in a different unrelated (SE) business. Doesn't the CA just increase the un-usable loss on the first business?

tim

Yes you can. You can choose whether to keep the loss in the business which made it (and to carry it forward to be set against future profits), or to set it against profits of another SE business or possibly even against income from employment.

There are some restrictions, but not as far as I know on a "relatedness" basis. But you can't, for instance, set losses from rental against SE profits.

Only if the CAs are actually claimed, and that's the point. If you *did* claim them, I'd expect you to be able to transfer at WDV, but if not, then the WDV is still 100% and so you should be able to transfer at that.

Why do you want to set up a limited company? I find self-employment a lot simpler place to be unless you have large divvies to pay. Think carefully about setting up a Ltd Co. as you don't seem to have got to grips with the rather limited demands of self-employment.