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capital allowances on VAT FRS

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I have a client who bought recently PC in total of 2500 on finance but this will start from next available month. Client is registered on FRS. Can he claim VAT as capital allowance on this specific item? 

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By lionofludesch
06th Feb 2020 09:53

What sort of finance ? Why isn't he claiming the VAT on his VAT return ?

Why is this question anonymous ? Are you the "client" ?

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By AWeb72
06th Feb 2020 22:23

The user "anonymous" is very prolific on this forum..............

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By Cathy Milligan
10th Feb 2020 10:54

Yes, he can

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By Cathy Milligan
10th Feb 2020 10:56

Yes, he can as it is above the £2K limit

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By cfield
10th Feb 2020 11:32

A few points to be aware of. Firstly, if the finance is a hire purchase contract, and for £2,500 it sounds like it is, then OK to claim the VAT up-front, even though the client is on the FRS, as the HP is treated as a loan for VAT purposes. However, if it is a lease and the lease rentals include VAT, you cannot claim the VAT up-front, only on the monthly instalments, which you should get a VAT invoice for.

Secondly, the £2k threshold for claiming input tax on capital expenditure under the FRS only relates to single items, so make sure the £2,500 didn't include other things too, like warranties, printers or ink cartridges. If it did, the asset concerned may be below the £2k threshold.

Thirdly, the £2,500 may qualify for input tax but it doesn't qualify for the 2% test you need to do each quarter under the FRS, unless it includes qualifying goods like ink cartridges. Capital assets are excluded.

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By alec247
10th Feb 2020 12:22

"Secondly, the £2k threshold for claiming input tax on capital expenditure under the FRS only relates to single items, so make sure the £2,500 didn't include other things too, like warranties, printers or ink cartridges. If it did, the asset concerned may be below the £2k threshold."

It doesn't only relate to single items.

In fact Notice 733 uses the same example as you did as an example of what qualifies. "a computer package (computer, printer, camera, scanner, speakers, and so on) bought as 1 package is 1 purchase of capital expenditure goods – if the package costs £2,000 or more (including VAT) then input tax can be claimed"

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Replying to alec247:
By cfield
10th Feb 2020 13:03

OK, overdid it a bit with that example. Yes, items bought as a "package" qualify for the £2k, but I don't think you can buy more than one computer, or job lots of small items, that's what I was really getting at. Otherwise it would be easy to get round.

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Replying to cfield:
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By The Dullard
10th Feb 2020 13:11

Eh?

So, you're saying that if I buy one computer for £2,200 I can recover the VAT, but not if I buy two computers for £1,100 each? I think you're wrong.

And I'm understating my position by using the word "think".

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Replying to The Dullard:
By cfield
10th Feb 2020 14:00

Hmmm, para 15.3 of the FRS guide does say that different items of kitchen equipment count as 1 purchase if bought from the same supplier at the same time, so I suppose the same goes for office equipment. You may well be right. Indeed, you are probably right. Just seems a bit counter-intuitive, but they do say a single purchase, so on that basis, it would be unduly restrictive even to say it must be a package of goods that all go together.

Also goes to show how totally perverse the VAT rules are sometimes when the same items wouldn't qualify if you bought them at the same time for use at the same location but from different suppliers. I wonder if items bought from different retailers on Amazon would qualify if they were all on the same order, and thus a single purchase. Would that fall foul of their single supplier rule?

Assuming not, it would be tough luck if you forgot something and had to order it separately from the same supplier a minute later, but for less than £2,000. Maybe you could claim it was the same purchase, as it would be the same as buying an extra item in a shop whilst still on the premises after paying for the first lot. Or would that qualify anyway?

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