My son is an apprentice mechanic who will earn around £5k this year (he started mid-way through the year). As a result his tax will be minimal (probably 10s of £s).
As is normal for apprentices, he has had to buy his tools at a cost of around £1,700 and I should like to get him relief on this amount. As he will not earn enough to take the relief in 2007/08 I checked with HMRC. The helpdesk thought he could not carry the relief to next year, but my payroll team thought he could.
Who's right?
Thanks in advance for any answers.
Confused
Replies (4)
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Tools
TJ has, quite rightly queried the status of the individual, whereas I originally answered (as below) on the assumption he was self employed. I don't think that there would be an issue over the costs of the small consumable tools in the year or thoses capitalised but the accounts comments would obviously not apply.
I would suggest that you try to identify those tools that could be capitalised and those that have been used and possibly replaced in the course of the trade. The cost of any which can be capitalised, can be carried forward by way of disclaiming the capital allowances for the year.
This will not necessarily enable all of the costs to receive tax relief but it will ensure the correct treatment as any held at the end of the year would effectively be on the balance sheet and have not been costs solely relating to the profits in the first year.
He's employed
Tj,
he's employed. I never thought to make that clear.
Thanks for the replies.
My understanding
When I was working in accounts the rule of thumb was that any tools over £100 or that will last longer than 1 year were capitalised.
I should do a tax calculation for the whole year, including any income prior to his apprenticeship. If he has had other income in the year then Anon is correct in that it may be worthwhile claiming the cost and repairs to any tools not capitalised.
If he ever becomes self employed, my understanding is that he may introduce the extant tools at value. Only then, may he claim capital allowances.
For future years, he may consider claiming flat rate expenses for upkeep of tools and special clothing. see :-