Tax treatment of fixed asset purchased with business loan - Free ...

Hi,

I am a UK-based sole trader (i.e. self-employed) required to submit a self-assessment tax return. Since my business is very simple, I keep my own and accounts and submit my own tax returns.

In the last tax year, I purchased a new computer for business use. I took out a business loan from my bank to finance the purchase. I now need to work out how to account for this purchase in my tax return.

Having read the notes to the self-employment (full) tax return, I believe that I can claim a capital allowance for 100% of the price of the computer (which was around ?1,900 including VAT). I assume this means the full cost of the asset will effectively be deducted from my taxable income in year 1. Is this correct?

Assuming this is correct, this leaves me with the following questions:

1. I am VAT-registered, so have already claimed back the VAT on the purchase. I assume, therefore, that the amount of the capital allowance I can claim is 100% of the cost of the asset excluding VAT? (Otherwise I'd be getting tax relief on an amount of VAT that I've already claimed back.) Is this correct?

2. As I repay the loan over the next three years, I will obviously paying back more than the amount of the capital allowance I can claim on the asset (because of interest). Can I claim the interest as an expense? If so, how do I work it out and where do I claim it on the tax return? (I think the loan agreement only states the total amount of interest over the full loan term, so I'm not sure how to deal with this for each individual tax year.)

Thanks in advance for any answers.

Rob

Source: http://www.freebusinessforums.co.uk/accounts-finance-tax-affairs/32164-tax-treatment-fixed-asset-purchased-business-loan.html

florida state football ben breedlove kid cudi ben breedlove matt barnes hcm loretta lynn gene kelly