Lately I’ve been reading various forums such as MoneySavingExpert and moneysupermarket in order to advise anyone asking about tax rebate issues and I’m slightly alarmed at the amount of bad advice that’s given out on them.
That’s why I thought it was a good idea to put the record straight on a few issues relating to mechanics tax rebates for tools bought for their work. This seems to be where the most mistakes and misconceptions lie.
There are a lot of employed (NOT self employed) mechanics and car technicians on these forums asking about tax rebates for the tools they have bought (and have not been reimbursed by their employer) and the advice given often means that they aren’t getting the full amount of tax owed back.
Let’s look at each misconception and correct them.
Flat Rate Expense Allowance
This is what is commonly advised that mechanics should claim, as most people – including many accountants – believe that PAYE employees cannot claim capital allowances. This is untrue.
If you follow the flat rate allowance route you will only get back a few hundred pounds. You CAN claim capital allowances, as set out in EIM36610, EIM50700, EIM36910, help sheet 206, all available from HMRC, and by doing so you will receive far more of a refund than going down the flat rate expense route.
It is quite complicated, however. Problems arises because the rates of Writing Down Allowance, Small Pools Writing Down Allowance and First Year Allowances differ for every year from 04/05 to 09/10 and HMRCs guidance for older years is not readily available.
You Can Only Claim Going Back Six Years
Another common misconception that while technically could be considered correct means that many mechanics and car technicians don’t think to claim for tools bought before those six years.
You can, in fact, claim as far back as you have receipts for – in one case there has been a successful claim going back to 1984!
How it works is that items from pre-04/05 can be added to the Capital Allowances pool which, subject to the appropriate writing down allowance (WDA or SPWDA), is offset against tax from 04/05 and the balance of the pool carried forward to the next year and then so on. Capital allowance rules allow this as long as a Self Assessment return has not been issued for that year.
As I said, it’s a very complex thing to do but it can be done and successfully.
MoneySavingExpert, moneysupermarket and other forums are a highly valuable source of information – I use them myself – but any advice you find on them should always be thoroughly checked out before you act on it or it could end up costing you money. Just be careful what you read!
The Entitlements Agency has successfully claimed tools tax rebates on behalf of many mechanics and car technicians. If you’d like them to do the same for you, download a claim form here, complete it and return it to them or contact them here and they will send a claim pack out to you.
The average claim results in a tax rebate of around £900 but, depending on your circumstances it could be higher.