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Self Assesment Employee purchased laptop

Laptop purchase by employee and used solely for work for employer.

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Filling out a self assesment form - what allowance for Laptop purchase (£1000) by employee and used solely for work for employer?

As an expense it is presumably deducted from gross income.This will mean that (as basic rate payer) he will receive a benefit of 20% of the cost of the laptop.

 

Is it all allowable in Year 1? Or 40% year 1and 25% on reducing balance in subsequent years?

Apologies for this basic question but the online answers seem to be somewhat confusing.

 

Replies (15)

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By frankfx
13th Jan 2021 22:18

Was it necessarily incurred expense?

An employee buying a briefcase, remember paper files and pencils, is not necessarily incurred.

Extract litg

"This means that "any "person performing your role would" have to "incur the expenses and that the expenses are incurred while performing your duties "rather than "putting you in the position where you are able to perform those duties"

Leading case

"An employed journalist is not allowed to claim tax relief for the cost of newspapers or magazines which he or she buys merely to keep informed or up to date.

The statutory justification for this denial of tax relief is that the expense is
not incurred in the performance of the duties of the employment

, an interpretation confirmed in the Courts.
"

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Replying to frankfx:
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By Paul Crowley
13th Jan 2021 22:29

Much more detail than I would have put

I would simply ask if all employees needed the same quality computer at own expense?

If so why?

Is it your computer that you would never use for any other purpose?

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By richardbreak
13th Jan 2021 23:02

Thanks for responses.
Computer is necessary for work and solely for work. Would be unable to do perform duties without a computer.
Other employees have either purchased or used their own laptops as they need them in order to work.
So I would presume that the expense is incurred in the performance of the duties of the employment.
If so then surely deductible from tax not given tax relief.

As I mentioned I am somewhat confused.

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Replying to richardbreak:
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By Matrix
13th Jan 2021 23:28

If it is solely for work then ask the client why his employer hasn’t paid for it.

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Replying to richardbreak:
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By Tax Dragon
14th Jan 2021 06:56

richardbreak wrote:

Thanks for responses.
Computer is necessary for work and solely for work. Would be unable to do perform duties without a computer.
Other employees have either purchased or used their own laptops as they need them in order to work.
So I would presume that the expense is incurred in the performance of the duties of the employment.
If so then surely deductible from tax not given tax relief.

As I mentioned I am somewhat confused.


Getting something in order to work is not the same as working. Factory worker has to get to the factory to work. Getting to the factory is not working.

See Frank's more detailed answer.

You could look into CAs.

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Replying to richardbreak:
By SteveHa
14th Jan 2021 08:58

richardbreak wrote:
Computer is necessary for work and solely for work. Would be unable to do perform duties without a computer.

That isn't the test in ITEPA, though. The test is whether the expense is necessarily incured, which is a different thing altogether.

If the laptop is necessary for the work, why is the employer not providing it?

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By jonharris999
14th Jan 2021 07:07

This isn't a basic question, Richard - it is intricate.

Have a look at EIM36560 and associated pages.

Here's an extract with an example of some of the hurdles you need to jump (btw "You" in the following means "the HMRC officer investigating this matter"):

"If the expense is substantial, it would be reasonable to expect the contract of employment to include a specific reference to the requirement to incur it. If there is nothing explicit in the contract, find out whether the employee has approached the employer to provide the item, or to reimburse its cost, and, if so, with what response. If the employer is not prepared to bear the cost and advances the view that the expense is not considered necessary this will clearly weaken the taxpayer’s claim, though without being entirely conclusive. You may also need to investigate whether other workers with similar duties have also incurred the same sort of expense and if not, how they manage to perform their duties."

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By tom123
14th Jan 2021 07:56

A pretty duff employer that is requiring staff to incur that expense?

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Replying to tom123:
Melchett
By thestudyman
14th Jan 2021 09:51

Ha, yes it definitely sounds like an employer I would not want to work for if they are not willing to providing tools essential to my work.

Sounds like one of those micro start ups who cannot afford to pay creditors and instead gives them shares or share options.

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By Tax Dragon
14th Jan 2021 09:24

What people are saying is correct. There is nevertheless some confusion going on here, I think (because different people - including me - are talking about different tests without saying which test they mean). This reply is to clarify, hopefully not add to, the confusion.

ITEPA does not draw a capital/revenue distinction. The general rule (in s336(1)) is that a deduction from earnings is allowed for an amount if... (two tests):

(a) the employee is obliged to incur and pay it as holder of the employment, and
(b) the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment.

It's a duff employer makes its employee contractually obliged to incur the cost of £1,000 worth of computer equipment. If there's no contractual obligation, you almost certainly fail both tests.

CAA s15(1)(i) includes employment as a qualifying activity for CAs. The restriction (/test) here is in s36: the kit must be "necessarily provided for use in the performance of the duties of the employment or office". (Note: no W&E element. "Necessarily" is a high hurdle though.)

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Replying to Tax Dragon:
By SteveHa
14th Jan 2021 09:52

Tax Dragon wrote:

CAA s15(1)(i) includes employment as a qualifying activity for CAs. The restriction (/test) here is in s36: the kit must be "necessarily provided for use in the performance of the duties of the employment or office".

However, doesn't this require the equipment to be "provided" to, rather than purchased by the employee.

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Replying to SteveHa:
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By Tax Dragon
14th Jan 2021 10:11

Provided to the employee? Ie provided by the employer? But then the qualifying activity is the trade (or whatever the employer does). If the qualifying activity is the employment, and the cost a cost of that employment, then... I would read "provided" as "provided by" (the employee), not "provided to" (her/him). [Else it don't make no sense, do it?]

I think Frank and Paul's answers reference case law on what s36 means, but I confess I haven't looked into it for this thread (and I might be misremembering). I do know the EIM has a section on employee CAs, worth the OP having a peek maybe.

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Replying to Tax Dragon:
By SteveHa
14th Jan 2021 10:50

OK, I'll go along with that. I didn't look too deeply.

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By fawltybasil2575
14th Jan 2021 10:43

@ richardbreak (OP).

The legislation, to which Tax Dragon has kindly drawn attention, is here:-

https://www.legislation.gov.uk/ukpga/2001/2/section/36

One should look also at the various EIM guidance, including here:-

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim50700

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim36730

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim36540

The “necessarily provided” words hold the key. If the client/employee believes that their employer declines to provide a laptop (or a similar device) which the employee must use in order to carry out their duties of employment, then they should make the Capital Allowances claim (and be prepared for HMRC to question the validity of the claim).
That said, frankly the amount at issue (£200 if the client is a basic rate taxpayer) is unlikely to be queried by HMRC, albeit one must of course, as an accountant, not associate oneself with a claim which one believes to be invalid – obtaining a letter/email from the employer confirming that the client HAS been required to provide the laptop (or similar device) is recommended.

Whilst your question indicates that there is no private use, the fact that there WAS private use would not invalidate the claim (it would simply mean that the appropriate private use restriction should be made).

In most cases one would claim the full AIA (100%): but in the unlikely event that such claim would result in a loss of Personal Allowance, then one can “tailor” the AIA claim in the normal way, and claim WDA thereafter.

Basil.

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By frankfx
14th Jan 2021 13:49

The newspaper tax case is Fitzpatrick.
Went to House of Lords
Lord Templeman comments are required reading.

First tier tribunal case in 2018.
HMRC won, staff wanted to claim laundry costs.

Taxation Magazine . an article
"The Continuing Myth "
that that meeting the
" Necessarily" hurdle was nigh on impossible.

OP

What notes are you going to place on your tax file justifying the claim?

More so since you say that you are confused, yet do not cite the legislation causing confusion.

When the client signs the return and claims the tax deduction, Will he refer to your letter supporting the claim and tax return entries.

And your robust explanation.

Is he likely to share that endorsement with co workers, who may beat a path to your door?

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