Contractors’ Questions: How to claim an Apple iMac plus software?
Contractor’s Question: I had to purchase a new iMac in the first week of January for my contract business. How much of the item’s significant price tag can I expense? I use it for work and for home-life too, so assume I can claim 50% off my tax assessment. Is that right?
Plus, I currently have a software subscription which I pay a monthly fee on one device to use. I pay out of personal funds because it’s quite a small amount but I now need to extend the subscription to two devices, which is costlier. So how do I claim the two-device subscription cost? And should I claim retrospectively for the software I used last year which I paid out of my own pocket? I won’t if it will attract suspicion from HMRC.
Expert’s Answer: Assuming your business is a limited company, then if you use your computer 50% for business and 50% for private use, you would actually include the full cost of the computer in the company's accounts as an asset of the company. And the company can claim capital allowances on the cost of the asset to reduce the amount of profit it pays corporation tax on!
But you would need to fill in a form P11D and include the private use of the computer as a taxable benefit, under these HMRC rules. If your private use of the computer is insignificant, then you may not have to treat the private use as a taxable benefit, but that would be worth discussing with your accountant.
For the software, you could include the second device's payment in the same way as the first, but do check this with your accountant too, since there may (again) be taxable benefits involved, depending on who owns both devices and whose name any contract is in. Do also speak to your accountant about whether you could include the previous year's transactions in this year's accounts for the company or whether you'd need to revise a previous year's accounts. Good luck!
The expert was Emily Coltman, chief accountant at FreeAgent, an accounting platform for contractors.
Editor's Note: Related --
Contractors' Questions: Can I claim an iPhone as a company expense?
Contractors' Questions: What's the best way to buy a car for contracting?
Emily Coltman FCA, chief accountant of FreeAgent, is a graduate of the University of Cambridge. She has been working with small businesses since the year 2000 and is passionate about helping their owners lose their fear of "the numbers" and the taxman. She is the author of three e-books, "Refreshingly Simple Finance for Small Business", "Micro Multinationals", and "Very Awkward Tax"."
