“I am an IT contractor operating through a limited company. I am going to be buying a new laptop shortly that will cost about £2,500. I have two questions. Firstly does it matter if I use the laptop for both personal and work use? Is there any personal tax impact of this? Secondly, I am on the VAT Flat Rate Scheme – can I still claim the VAT back on this cost?”

shutterstock_234008701

 

UPDATE March 2017 – before reading this article please be aware of the flat rate scheme changes from April 2017 for limited cost traders, see our article HERE.

 

In many lines of work companies provide a laptop to their employees where inherently there will be some personal use. HMRC guidelines suggest that this personal use should be kept to a minimum in order for the laptop to not attract a benefit in kind charge.

In this case so long as the laptop is clearly primarily for business use (i.e. it has the required software for business and is used for client work on a regular basis) then there should not be any tax issues and a challenge from HMRC is unlikely to be successful.

If, for example, the laptop was used by another member of your family on a daily basis and was not used at all for client work it should be accounted for as a personal item and either go against the directors’ loan account in full or be taxed as a benefit in kind.

With regards to the VAT position, on the flat rate scheme you can reclaim VAT on capital expenditure where the amount of the purchase including VAT is £2,000 or more and on a single invoice.

In this case assuming the laptop is for business use then you would simply add the VAT element of the purchase of the laptop into box 4 of the appropriate VAT return.