Buying a laptop with my company

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churrusco

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Morning all,

This question is some kind of a shame as it seems a very trivial one. Anyways, my accountant is off for some days and who is the best source of information I know?, askaboutbusiness of course.

The thing is I would like to change my laptop and as I am contracting with my own company it seems a no brainer to buy it with the company. Now, I also have a business credit card from BOI linked to my company's account.

So the question is, if I buy the laptop with the card, obviously I avoid paying the VAT, but do I avoid also paying tax? I mean, I normaly use the money of the company to pay myself and I have to pay taxes on that money. Now, if I buy the laptop, that buy will be before taxes. Therefore the laptop will be 40% cheaper plus the money you save in VAT.

Sorry about this question, I know is kind of basic, but never bought anything with the company... am I right with my assumptions?

Thanks!
 
If your laptop is being used exclusively for business use, then there is no problem with your company paying for it and claiming back the vat on it. It can claim capital allowances at 12.5% each year on the cost. If there is an element of personal use (which will be normal) there may be VAT & Directors Current ac implications. Best to ask your accountant when they get back.
 
If you can justify the laptop for business purposes this would be the normal way to purchase it.

You can purchase it without paying VAT and as ubiquitous mentioned you can claim capital allowances at 12.5% each year on the cost.

In the past I have purchased a laptop, printer etc. in this way. If you have your own company, it is easily justifiable. You can use the equipment for email, issuing invoices, exchanging contracts, accounting, market research, training etc.
 
Thanks very much for all the answers.

Well I definitely need the laptop for my work as I am an IT contractor and the laptop is my main working tool.

VAT is ok. I understand the 12.5% cost claim. What about the other assumption. Am I right when I say that the laptop is bought "before tax" and therefore the savings are huge if you compare it with buying on your own as regular employee?
 
The company buys it and a company pays tax on its profits (if they are not distributed). So yes, the company will earn the 2K (lets say), spend the 2K and have no profit from the 2K and so no tax liability from the 2K. Not only is there no tax liability, you can reclaim the cost at 12.5% per year for a number of years (not sure how many).

Anyway, short answer is yes. You are also entitled to have your company purchase all other tools necessary for you to carry out your work in this manner. These include training expenses such as course fees, relevant books and stationary etc. etc.
 
Frasier said:
The company buys it and a company pays tax on its profits (if they are not distributed). So yes, the company will earn the 2K (lets say), spend the 2K and have no profit from the 2K and so no tax liability from the 2K. Not only is there no tax liability, you can reclaim the cost at 12.5% per year for a number of years (not sure how many).
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This is totally incorrect. The company cannot claim a P&L deduction for the cost of a capital item, in addition to capital allowances.
 
I stand corrected. I assume though that they can deduct it from the profit and loss or claim capital allowances?

I am in the same position as the OP and I always purchase such items through my company (as advised). Granted, my accountant then handles how this is reflected in the company accounts.
 
Where can I find what sort of purchases could be considered as expenses, put against the sales to get the difference as a profit, please ?
 
There is no list, best to run stuff past your accountant as it comes up.

You can ask about running costs for your (home) office, mobile phone, training, books, stationary (incl stamps) etc.

You might want to change your mobile to a company mobile if you use it primarily for work. As an IT contractor you get calls from and make calls to recruitment companies constantly and possibly need to be on call so you could justify this as a company expense as long as it is primarily used for work.

Ask other contractors you work with, your accountant etc. You always pick up things from them. For instance, how to reclaim vat from the UK etc. (IT training in Ireland is non-existent).

You can also buy a tax saver travel pass through your company if you use public transport. I believe you can give yourself (an other director(s)) an annual bonus of €250 tax free in the form of vouchers.

Whatever it is you do, run it past your accountant.

If your new to this game, it's also worthwhile discussing your long term goals with your accountant or tax consultant. They can advise you on the most tax efficient way to operate you company etc. Some accountants are better at giving advice in this area than others.
 
No they can't. Its a capital item, ie an asset.
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There you go Nicky. Buy it through your company, deduct the VAT and at the end of the year when the accountant is doing your accounts, they will claim capital allowances at 12.5% each year.

ubiquitous, can you tell us how many years can this be claimed for? perhaps (100/12.5)??
 
Frasier said:
ubiquitous, can you tell us how many years can this be claimed for? perhaps (100/12.5)??
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Hope Ubi doesn't mind me stepping in here... you claim 12.5% of something each year, you will have claimed 100% of it in... 8 years [100/12.5]
 
8 years for a €5-600 laptop? I dont know a single contractor where their accountant didnt just write it off in year 1 in the p&l. It might not be "proper" done but I personally know of a dozen+ cases where it has been done
 
contemporary said:
8 years for a €5-600 laptop? I dont know a single contractor where their accountant didnt just write it off in year 1 in the p&l. It might not be "proper" done but I personally know of a dozen+ cases where it has been done
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I don't dispute that it has been done. The actual P & L write off in the financial statements will depend on the company's Depreciation Policy.

However TAX LAW dictates TAX write offs of 12.5% pa, straight line.
 
This is something that has come up many times before. I agree it is ridiculous to expect an IT contractor to write off a laptop over 8 years, but as already stated it's the tax law.

You can buy a company mobile phone for say €300, and spend €100 per month on calls and yet this €1500 is written off as it's used over 12 months. However if you spend €500 on a laptop you have to write it off over 8 years.

I think common sense 'should' be used here. If you're an IT contractor chances are you're changing your equipment every 12 months. In this case you should claim it over 12 months.

The fact is you're not gaining anything from claiming it over 12 months. If you hold on to it for 2 years and then get rid of it you claim the remaining 75% anyway so what's the difference? It's simply a different way of accounting for the same item.
 
Unfortunately common sense and tax law are not one and the same. If you write off an asset directly to P&L and are still using it by the time you are subjected to Revenue Audit, you may well end up paying interest and penalties on a tax underpayment.
 
If at the end of the year, the business sells the laptop for €1 or donates it to charity or somesuch, can the business take some sort of charge to reflect the loss of the asset to the company (and in effect writing off the total cost in one year)? Or does the business still have to depreciate over 8 years irrelevant of the disposal? After all the business isn't going to keep stockpiling old laptops with one year usage.
 
Dearg Doom said:
If at the end of the year, the business sells the laptop for €1 or donates it to charity or somesuch, can the business take some sort of charge to reflect the loss of the asset to the company (and in effect writing off the total cost in one year)? Or does the business still have to depreciate over 8 years irrelevant of the disposal? After all the business isn't going to keep stockpiling old laptops with one year usage.
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The Capital Allowances system allows for a balancing allowance to be applied in the year of disposal. This represents basically the "loss on disposal".
 
To clarify the difference between "capital" items (claiming wear and tear) and "revenue" items (set against P&L) - there is a broad rule - if the item will last for 12 months plus it is a capital item, and if not it is a Revenue item.

There is no other ruling on this.

Therefor a computer which will probably last 3 years is a cpital item, whereas the printing ink is a revenue item.

The tax rules for wear & tear are 12.5% straight line basis do not work in the favour of a computer, but also consider that a desk or filing cabinet, that may last 10 years will be in the company's favour - it is all a matter of swings and roundabouts.
 
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