Self employed tax question

As long as you weren't taking the pee and constantly writing off stock, that you blatantly intended to sell, against profit in the year of purchase instead of the year of sale, then I'm sure you could just match it againt your income tax year. I.e. claim it as a tax deductible business expense in year 1, then whoops I just happen to have sold it in year 2 so I pay tax on the profit in year 2.

Not read the whole thread so this is just a casual brain spooge.
 
pull2808 said:
It's a capital expense, Freakbro isnt far off with his explanation. Mollymoo, unfortunatly it's not a trade item therefore shouldn't go onto the profit and loss (as income or an expense).

To be honest mate, find a local accountant (1 man job) for some tax advise. Even if it costs £400 it's likely you'll save on the tax in the long run.
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I saw it as he had purchased the equipment and not bothered having it as a fixed asset as he put it all straight in as an expense, like an overhead, so wouldn't be a capital expense, same as any company would have equipment purchases over a certain value only as depreciable assets.
 
Freakbro said:
It's not included in the Turnover (Income) side of your business no, just as the purchase of these assets is not included in the Allowable Expenses section either (box 8 - 21)
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According to that helpsheet, the purchase of equipment is included in the Anual Investment Allowance.

BTW, I'm not currently filing my return. I did that last year. I'm just about to sell some gear so I'm prepping for April when I'll have to declare the income from those sales.
 
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mollymoo said:
I saw it as he had purchased the equipment and not bothered having it as a fixed asset as he put it all straight in as an expense, like an overhead, so wouldn't be a capital expense, same as any company would have equipment purchases over a certain value only as depreciable assets.
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I don't recall exactly where / how they were declared, but I'm 99% sure they were declared differently to my running cost expenses (ie post, stationary, phone calls etc)
 
Anyway, I'm going to the pub. My brain has been scrambled for long enough, I'm now going to drown it in alcohol.

I'll read through this thread again tomorrow, cos at the moment I'm still unsure how I declare the income from these sales.

Thanks guys.
 
banja said:
I don't recall exactly where / how they were declared, but I'm 99% sure they were declared differently to my running cost expenses (ie post, stationary, phone calls etc)
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If you have claimed the full value against your tax in the year of purchase, it's either a fixed asset that has been fully depreciated in the first year in which case it will show in your profit and loss account at the full purchase value in your depreciation nominal, and will sit in your fixed assets as a zero value asset, or it has just been put straight to your P+L as an expense, either way it would make no difference the next financial year, if you sold it it would be a revenue in your P+L. In my opinion.
 
mollymoo said:
I saw it as he had purchased the equipment and not bothered having it as a fixed asset as he put it all straight in as an expense, like an overhead, so wouldn't be a capital expense, same as any company would have equipment purchases over a certain value only as depreciable assets.
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Never assume what the client has done is correct. This is a capital item based on his trade and shouldn't be an expense in the P&L.

mollymoo said:
If you have claimed the full value against your tax in the year of purchase, it's either a fixed asset that has been fully depreciated in the first year in which case it will show in your profit and loss account at the full purchase value in your depreciation nominal, and will sit in your fixed assets as a zero value asset, or it has just been put straight to your P+L as an expense, either way it would make no difference the next financial year, if you sold it it would be a revenue in your P+L. In my opinion.
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Sorry, but you're not correct. Revise how the double entries would be treated for the accounting gain. Tax treatment is different.

Therefore, you'll have the accounting treatment of a capital sale and the tax treatment of capital allowances/balancing charges/etc depending no the initial relief (such as AIA) and tax planning he does.

The dangers of using a forum for tax advice ;)
 
mollymoo said:
If you have claimed the full value against your tax in the year of purchase, it's either a fixed asset that has been fully depreciated in the first year in which case it will show in your profit and loss account at the full purchase value in your depreciation nominal, and will sit in your fixed assets as a zero value asset, or it has just been put straight to your P+L as an expense, either way it would make no difference the next financial year, if you sold it it would be a revenue in your P+L. In my opinion.
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It's definatly not revenue i assure you.
The fact your talking about depreciation (an accounting adjustment) when we are discussing the tax treatment means you are unaware of the correct treatment and are guessing.

As you are on about the disposal of the assets without knowing what you did last year when you purchased them no-one will be able to correctly answer the question.
 
pull2808 said:
As you are on about the disposal of the assets without knowing what you did last year when you purchased them no-one will be able to correctly answer the question.
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It's just the wording I don't remember.

As far as I recall there are two entries for costs (I only require the short tax return) One is day to day expenses like stationary, phone calls, postage etc. The other is for equipment. I declared all my costs correctly. If I'd declared the equipment simply under running costs I wouldn't even bother worrying about the income from selling them.

But I definitely declared them as equipment purchases (under whatever section that was - AIA I believe)
 
If you declared them as equipment purchases and the amount was put through as AIA then the amount received from the sale will need to go as a balancing charge.

http://www.hmrc.gov.uk/worksheets/sa210.pdf section 3.9 balancing charge.
As you claimed the full cost last year the pool value will be Nil. The balancing charge will be the sale amount and will be treated as per the pdf.

Hope that helps.
 
Thanks - definitely making more sense. Still confused by 'pools' and I'm convinced the wording is purposefully confusing, but getting there.

I found my accounts and the gear was definitely declared as 'capital expenses'

Thanks for your help everyone.
 
You get an Annual Exempt Allowance of ~£10k where you dont pay anything on Capital Gains, then you can apply other reliefs if applicable like Entrepreneurs' Relief, Business Asset Roll-Over Relief, Incorporation Relief, Gifts Hold-Over Relief

Then the capital gain can be subject to either 18 or 28% tax depending on the circumstances.

I'm a little sketchier on these, my general client base doesn't consist of that large or complicated businesses :p
 
Only if it's part of the annual allowance for writing off costs against taxable profit. If it goes over that, you then pay more income tax as your asset sits on the balance sheet rather than being expensed.
 
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