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Two year rule - how enter expenses?
I have been working in my present contract for over two years therefore cannot offset my expenses against tax. How should I enter my expenses into FreeAgent to ensure that any Tax/NIC calculations carried out include these expenses for Tax/NIC purposes?
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Hi Ricahrd,
I would make it part of the description when you record the expenses under My Money > Expenses. Without going into accountantese, those are the entries that form part of the tax computation, rather than the Money Paid to User > Expense Payment entries.
Thanks though, for your feedback.
Kind regards,
Emily
The company says
this answers the question
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Inappropriate?Hi Richard,
At the moment there's no "Tax Disallowable" setting in FreeAgent. (It does pick up business entertaining as non tax deductible, but obviously you don't want to classify all your expenses as entertaining.)
What I would suggest you do, is to enter the expenses as normal, but put something in the description to indicate that they're not allowable for tax, to help your accountant when he/she comes to do your figures - or indeed to help you track back, if you don't have an accountant.
Would you find a "Tax Disallowable" setting useful?
Kind regards,
Emily -
Inappropriate?Hi Emily
I have done as you suggested and added a comment to the description.
I don't know whether "Tax Disallowable" would be useful as my requirement is for these entries to be treated as salary. As I haven't found a report that calculates my net salary and shows me how much I have taken out as salary and therefore the amount still to withdraw as salary, this classification will be of no use to me.
Best regards
Richard -
Inappropriate?Hi Richard,
With apologies if I'm being daft here, but I don't quite follow what you're trying to do. Why would you want to classify expenses (money spent) as part of your salary (money received) please?
Kind regards,
Emily -
Inappropriate?Hi Emily
It is probably due to my lack of knowledge of FreeAgent. My fear is that if I mark an entry as expenses that this entry is treated as expenses for the calculation of tax, but as I am more than two years on my current contract my expenses will be treated as salary for tax purposes. The tax calculation in FreeAgent is something I still have to check out.
As an employee I submit my expenses. As an employer I pay myself expenses and as an employer I know that I can no longer offset these expenses against tax. However they are still expenses made to the employee and I would like to record them as such.
Best regards
Richard -
Inappropriate?Hi Richard,
So you, as an employee of your company, would like to be paid back by the company for e.g. a train ticket that you'd paid for personally - but because the company has been working on that project for more than 2 years, the company cannot claim the cost of the train ticket against its tax?
Have I got that right?
Kind regards,
Emily -
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Inappropriate?Hi Richard,
Great, I'm glad I've understood that correctly.
What I'd probably do then, is to record the expenses as normal under My Money (so that you can claim them back as an employee), but put a note in the description to say they're tax disallowable (so that you, or your accountant, can pick them out when preparing the corporation tax computation and/or P11Ds, as appropriate).
Does that help please?
Kind regards,
Emily -
Inappropriate?Hi Emily
I am able to enter my expenses under My Money and see that they are paid by the entry Money Paid To User > Expense Payment and see that the balance for Out-of-Pocket Expenses reduces accordingly. Great!
But as I have entries Money Paid To User > Expense Payment for each monthly payment of my expenses, does this not mean that these are handled as tax deductable when FreeAgent calculates my tax? I need to indicate that that they are NOT tax deductable for any tax calculations FreeAgents carries out otherwise the amount of tax due will be incorrect for me.
Best regards
Richard -
Inappropriate?Hi Richard,
I appreciate that the tax calculated by FreeAgent won't be right for you but at the moment we don't have a tag to mark expenses as not allowable for tax.
That's why I suggested putting a note in the description and alerting your accountant, so that when he/she comes to do your tax computation, he/she knows to amend it for these expenses.
I will though, add the suggestion of a "non-tax-deductible" tag to our development wishlist.
Kind regards,
Emily -
Inappropriate?Hi Emily
Unfortunately the entry Money Paid To User > Expense Payment doesn't allow a user entered description so I can't flag these entries to my accountant. Could this also be added to your development wishlist?
Best regards
Richard -
Inappropriate?Hi Ricahrd,
I would make it part of the description when you record the expenses under My Money > Expenses. Without going into accountantese, those are the entries that form part of the tax computation, rather than the Money Paid to User > Expense Payment entries.
Thanks though, for your feedback.
Kind regards,
Emily
The company says
this answers the question
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Inappropriate?Tax Disallowable Category++ !!
This would be a big step towards auto-generated CT600 forms as well. At the moment FreeAgent can't do this on its own, even if the data is entered diligently and correctly. Seems to me knowing what can and cannot be expensed for CT is the last big hurdle for this feature. =)
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