Short Term Sole Trader Expense

Prez2

I've landed a short term (5 month) contract that will include a good deal of usability testing on computer and ipad apps - for this work I have to be a sole trader. I've had a PC for years that will do the job perfectly but I don't have an iPad so will obviously have to purchase one to complete the contractual work.

I had a previous 6 month contract and from my reading on relevant tax expenses I'm trying to work out which of the two below is appropriate:

a) I can only write off 12.5% of the iPad cost against tax per year as it is capital and something that has a life longer than 1 year, or

b) Given the contract runs out in 5 months with 0% chance of more work related to the use of the iPad afterwards and that the iPad is being purchased purely to complete the 5 month contractual work means I could write off 100% of the iPad.

Any thoughts on which is appropriate? If it's only 12.5% then that's better than nothing but would be nice if the purchase didn't have to touch the net profit if possible.

Shane732

Prez2 wrote: »

I've landed a short term (5 month) contract that will include a good deal of usability testing on computer and ipad apps - for this work I have to be a sole trader. I've had a PC for years that will do the job perfectly but I don't have an iPad so will obviously have to purchase one to complete the contractual work.

I had a previous 6 month contract and from my reading on relevant tax expenses I'm trying to work out which of the two below is appropriate:

a) I can only write off 12.5% of the iPad cost against tax per year as it is capital and something that has a life longer than 1 year, or

b) Given the contract runs out in 5 months with 0% chance of more work related to the use of the iPad afterwards and that the iPad is being purchased purely to complete the 5 month contractual work means I could write off 100% of the iPad.

Any thoughts on which is appropriate? If it's only 12.5% then that's better than nothing but would be nice if the purchase didn't have to touch the net profit if possible.

What do you intend to do with the iPad once the contract has finished?

Very hard to argue that you're entitled to write off 100% of a capital item that you're going to have for your own personal use after a 5 month period.

The more appropriate question is whether you'd be entitled to any deduction for the expenditure.

Look up short lived businesses and you should find what you're looking for.

nompere

Shane732 wrote: »

What do you intend to do with the iPad once the contract has finished?

Very hard to argue that you're entitled to write off 100% of a capital item that you're going to have for your own personal use after a 5 month period.

The more appropriate question is whether you'd be entitled to any deduction for the expenditure.

Look up short lived businesses and you should find what you're looking for.

If it's 5 months work from 1 July, then the period will be 1 July 2012 to 30 November 2012. That five month period will be the basis period for a 2012 Case 1 assessment. Capital allowances for a basis period of less than 12 months are apportioned. So it becomes €600 (say) by 12.5% by 5/12.

I make that €31.25.

If the 5 month period straddles 31 December 2012 there will be two basis periods - one for each of 2012 and 2013. The same principle will apply. The sums will be slightly, but not significantly, different.

Prez2

Shane732 wrote: »

What do you intend to do with the iPad once the contract has finished?

Very hard to argue that you're entitled to write off 100% of a capital item that you're going to have for your own personal use after a 5 month period.

The more appropriate question is whether you'd be entitled to any deduction for the expenditure.

Look up short lived businesses and you should find what you're looking for.

Honestly once contract is up the thing will likely end up in the corner of the room gathering dust - but I do understand this isn't something that would be typical so unlikely to be believed...

Will do a look up for the short term business and see what comes up - thanks for info.

Prez2

nompere wrote: »

If it's 5 months work from 1 July, then the period will be 1 July 2012 to 30 November 2012. That five month period will be the basis period for a 2012 Case 1 assessment. Capital allowances for a basis period of less than 12 months are apportioned. So it becomes €600 (say) by 12.5% by 5/12.

I make that €31.25.

If the 5 month period straddles 31 December 2012 there will be two basis periods - one for each of 2012 and 2013. The same principle will apply. The sums will be slightly, but not significantly, different.

Oh yeah damn - meant to factor that 5/12 into the 12.5% example above - thanks for the reminder. What you're suggesting is what I was thinking would most likely be the case - I wonder can I lease one of these things just for that period of time. Google should be my friend with that one. Thanks for the advice, much appreciated.

Shane732

nompere wrote: »

If it's 5 months work from 1 July, then the period will be 1 July 2012 to 30 November 2012. That five month period will be the basis period for a 2012 Case 1 assessment. Capital allowances for a basis period of less than 12 months are apportioned. So it becomes €600 (say) by 12.5% by 5/12.

I make that €31.25.

If the 5 month period straddles 31 December 2012 there will be two basis periods - one for each of 2012 and 2013. The same principle will apply. The sums will be slightly, but not significantly, different.

Of course,

I wasn't going into the detail around time apportionment. I was merely trying to point out that he won't be getting a 100% deduction.