Hi.

I am filling in a tax return for the first time ever.

Bit of back ground, i am a mechanic and due to having to provide my own tools/safety gear etc i can claim the tax back on it.

There are several companies which do this for you, send them your receipts and they do it but charge you 30% of what you get back from the tax man. Rather than do that i spoke to HMRC who told me i can do a self assessment myself.

So here i am doing it today. For the tax year 2011 – 2012 i spent £2917.20 on tools. So i gather on the return i simply put that amount down as my “expenses” ?

The reason i ask a simple question is on my calculation it says i am due £583.80 back which is 20% of my £2917 etc

But if i go through the receipts 1 by 1 the tax amount comes to £484.70….

I sense i am doing something wrong ? 😳

Are you adding up VAT figures? The amount you claim back is unrelated to that so you’ll also get a refund on non-VATable costs.

The receipts for my tools have the cost of the tool on its own and the individual vat amount for each.

So i added up the total for the tools individual cost + vat for each one to get my grand total.

AFAIK you pay tax on your profits. So take the cost of your tools etc off of your profits and pay tax on what’s left above your tax free allowance.

I don’t have to worry about the profits, i am an employee.

But if i go through the receipts 1 by 1 the tax amount comes to £484.70….

How did you calculate the tax for that?

Self assessment is for income tax. It has absolutely nothing to do with VAT.

the tax amount applied to each purchase is listed on its own beside each tool purchase. So i added them all up.

Well i wrote a letter to HMRC after having a phone call with them and they told me to do a self assessment.

You’re confusing income tax with vat

Spending that much on tools I would assume they would be assets in that you continue to benefit from their use in which case you would claim them as Capital Allowances and more specifically Annual Investment Allowance. Don’t forget to claim for your workwear, telephone usage and mileage if applicable.
If you’re not VAT registered then you claim the gross amount including VAT for your expenses.

So what’s my next move ?

I’m doing what HMRC told me to do.

AFAIK the capital allowances for tools is £120 per year.
I have the workwear claim cover, did that months ago.

Fill in the tax return and see what HMRC say… They may well adjust your tax code to allow for your tool purchases.

There is a flat rate for tools which is ~£120/yr, but that is not what you want.

Did you put the correct NIC band. One year I put class 4 and had to pay something when I’m class 2. When I corrected this I didn’t have to pay.

So to sum up, what exactly am i doing wrong ?

I contact HMRC and ask them can i claim for my tool expenses, they say yes. I tell them the amount i have spent is over £2500 so they tell me to fill in a self assess and send me the paper work.

I fill in all the stuff, £2917.20 is what i spent on tools including VAT for 2011-12

I’m not sure that you’re doing anything wrong.

You’ll have paid around £600 of tax on your £2917 that you used to buy tools.

Once you fill a self assessment in you’ll be filling them in forever…… Don’t do it.

You need to claim flat rate job expenses, I get it, it’s about £120 per year. You’ll only get the full amount back if your self employed.

No you can fill in another form and have HMRC remove you from the self assess list. I will need to do one for 2012-2013 anyway because i spent another £2k this year 😯

Glupton, agreed.

I fill in all the stuff, £2917.20 is what i spent on tools including VAT for 2011-12

As mentioned above. You are not VAT registered, so the VAT is irrelevant.

You just need to put the total spent on tools down and let them work from that amount.

Your are not claiming the VAT back, you are offsetting the cost of your tools against your wages for Income Tax calculations.

Essentially you are claiming back the Income Tax that you have paid on the wages that you used to buy the tools.
And as those wages were taxed at the rate of 20% that’s what you are getting back.

20% of the total price of the tools.

Forget VAT, it’s not relevant to your situation.

Sounds like you have done the right thing to me. You have paid for the tools with own money which was from taxed earnings. As you need them for work then they should come from your pre tax earnings so you can claim back the difference which will be roughly 20% of the cost.

mudmonster, why where you exempt from class 4 NIC? AIUI you pay class 2 AND class 4 unless you make a very small profit. I would like to be wrong and not pay if I’m missing something 🙂

But unless your self employed you won’t get anywhere near as much tax back.

Been in the car trade for 25 years mate, and claimed it all of those years.

Ignore VAT. You’re talking claiming tax back on your expense of tools for your job. It’s known as “flat rate job expenses” you’ll struggle to get anymore.

Just out of interest – what did you manage to spend £5k on tool wise?

Once you fill a self assessment in you’ll be filling them in forever…… Don’t do it.

Nah they’ve chucked my off since my last one, kinda wish I still had to do it as means I get it done. I guess I could still do one if I want?

Just out of interest – what did you manage to spend £5k on tool wise?

A Snap-On tool box will set you back £2000

Annual Investment Allowance up to 5/4/12 was £100k pa and the remainder claimed on capital allowances which more than covers your tools

Just to clarify, you are employed rather than self-employed, aren’t you?

If so, I recommend you use a much simpler form P87
Just go to the HMRC page and search for P87. You’ll find the form, and guidance on what you can claim for.

Also, the 31 January deadline does not apply to this form.

Trust me, I used to be an HM Inspector of Taxes 😉

from the OP it does sound like you are employed (your employer pays your tax and NI), in your call to HMRC they might have misunderstood your position/question (or they might be on a quest to get everyone on self assessment forevermore muah ah ha ha ha)

If you are self employed, from what i have read, find yourself someone qualified to help you.

the mix of advice/understanding/knowledge above is truly scary.

Dont necessarily listen to what HMRC helpline tell you – unfortunately the people that man the helpdesks do not always know anything about tax! I frequently have clients ringing HMRC who often tell them something completely incorrect – and as it is self assessment the onus is on you to get it right!

Esme is correct – however this form states that you can only use it to claim back expenses up to £2,500. If the expenses are more than that then it states you have to do a tax return, however the cost of doing this might outweigh the tax saving on the additional expenditure. Also, once you are completing tax returns it can often be difficult to prevent HMRC automatically issuing one each year – which you are then obliged to complete each year to prevent an automatic £100 penalty.

Please note you can only claim a deduction for expenses incurred for employment if they are ‘wholly, exclusively and necessarily incurred for the employment.’ Thus, if questioned you would have to be able to justify to HMRC that all of the above conditions are met.

HMRC website – general rule for expenses of employment

If you do decide to go down the tax return route you may need/want to get assistance in completing, which as you point out costs more than the benefit received. You will need to be careful that you report all forms of income (including any interest earned on any bank accounts etc).

You may want to limit your claim to the £2,500 and start off completing the P87 form and see how you get on – HMRC may ask further questions once they have received the form so be prepared to back up the expenditure with supporting receipts/explanations etc.

As already pointed out be careful not to confuse VAT (which unfortunately is a cost to you as you are not VAT registered) and income tax.

As mentioned above, employment tax is a complex area, in particular with regard to employment related expenses. If you are not employed, but are instead self employed (which doesn’t sound like the case from the above, but may need clarifying) then you should definitely be obtaining specific tax advice from a qualified professional!

Miss_spooky_b329

Hi,

Was watching robin hood!

To whoever asked i spent £5k no problem on tools. ALL of it is Snap on but believe it or not it’s all just tools, no tool box 😯 It’s a mighty fine collection though 😀

More important matters now.

I have the self assess 90% complete online. If i was to ditch it do i just leave it ? Would i have to notify HMRC that i am not completing it to avoid the £100 fine ?

This P87 form. Having done some looking into it it does seem a lot more hassle free, why the person at HMRC didn’t tell me about it is beyond me.

But i have noticed this on the website section about the P87:

“Claims up to £2,500

If your claim is £2,500 or less, HMRC normally gives you relief for your expenses through your tax code straight away. If you claim an estimated figure, they will review it at the end of the year. They will make any adjustments that are needed in your tax code for the next tax year.”

Yet on the P87 form it says:

“If relief is due you will receive a repayment of the tax paid on the net allowable expenses.”

So i either get it on my tax code or a cheque. Handy the HMRC website says two things…

To confirm, yes i am employed

Go see an accountant, should be able to get a tax return done for under £200. It will be right and filed correctly. They should also be able to cover their fee by making sure everything that is claimable is claimed.

My claim for the year 2011-2012 is £400-£500

An accountant may be a bit OTT

If they have issued you with a notice to file a tax return you will need to complete in order to prevent the fine (which will continue to increase beyond the initial £100 if you continue to not complete) so you may need to file it now anyway.

My claim for the year 2011-2012 is £400-£500

An accountant may be a bit OTT

Most have a tax return section who can process it very quickly. If you don’t know your way round the tax forms/system then it may simply be the easiest way of doing things. There may be some other tax breaks you are not aware of. They generally charge by time so if it’s simple it’s not that expensive.

You have 29 days left…..

As various people have suggested, because you are an employee (rather than self-employed), it may be wise to avoid the burden of annual tax returns.

However . . .

so they tell me to fill in a self assess and send me the paper work

Have they actually issued you with a tax return, or notice to complete a tax return? If so, it is ESSENTIAL that you submit a tax return online before 31 January.

If not, you still have the option to use a different method (eg P87)

They sent me paper work telling me about self assess and login details for the tax return website.

Esme – sent you an email 🙂

Just to follow up and end this…

I submitted the tax return after a phone call to HMRC.

A refund of £583 showed up today. It affects my tax free allowance somehow because of the other allowances i get so that’s why i received more.

They normally increase your tax code for the next year adjusting it for the work expenses you claimed in the previous year so that you don’t have a refund for 2012/13. This is a pain if your expenses decrease because then you owe HMRC money.