Tax Categorises

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Tax Categorises

Postby Ed209 » Sun Jan 13, 2019 2:46 pm

Just trying to sort out my accounts

What for example do you put things like Tape, glass cleaner, wedges under, glass smoothing pad ? I was thinking consumables or sundries

Small tools like for example allen Key set, HMRC says if not going to last more than two years

Apparently if you buy say 25 sheets of glass that is stock and not how I was doing it as "cost of goods sold"

I know HMRC are or have simplified the categories,

Can't quite my head round the stock one

Also my new underpiinner i presume is a capital asset and written off over several years

I am using Solar Accounts and have just appointed a accountant but not contactable today and want to get some paper work processed today
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Re: Tax Categorises

Postby JFeig » Sun Jan 13, 2019 4:59 pm

In the US we use the term "shop supplies" for such consumables. They might also consist of nails, glue, razor blades, and basic hardware such as screws, wire, cording, hangers, etc.

Cost of goods sold vs inventory is distinguished by the method of accounting, "cash basis" or "accrual basis".
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Re: Tax Categorises

Postby Abacus » Sun Jan 13, 2019 5:03 pm

Stock is not an allowable expense until sold.

So for example you start the year with 0 sheets of glsss

You purchase 500 sheets at £5, these are then an asset to the company worth £2,500.

At the end of the year you have 100 left, so the asset is now worth £500 and £2,000 goes into say cost of sales (or materials in my case) and is an allowable expense against corporation tax.

Depreciation is a bit of a dark art and best left to accountants. But in a nutshell. You buy a Maxine for £1,000, thus is a capital asset. You can depreciate it in your accounts over say 7 years, so 15% a year. However, you can usually offset the whole cost against your accounts in the first year under something called capital allowances.

Your accountant will then add back the depreciation each year in the books.

The more i learn, the less I seem to know!
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Re: Tax Categorises

Postby poliopete » Sun Jan 13, 2019 6:44 pm

Hi Paul

When we had our frame shop/gallery I always devoted one day a month for VAT and the books. I found that day was as profitable as any other working day. Besides knowing what was going on all the time, it helped keep the accountant's fees down.

Accounts were not computerized then and I used a "Simplex D " book system. Within that system was a "repair and renewal" section and did I make good use of that :giggle: Not much help to you today I suppose, sorry :(
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Re: Tax Categorises

Postby prospero » Mon Jan 14, 2019 8:24 am

Capital allowances are a bit tricky.

New equipment is not deductible as such, but the depreciation is. I work on a -25% per annum basis and keep a running total.
Of course this is system that never reaches zero so after it reaches a certain level you can write it off. This was told to me by
a senior tax inspector. Same with stock - If you have a bunch of moulding that you are never going to use you can value it at £0.

But there are exceptions. If you buy a tool(capital) and it wears out, the replacement is 100% deductable.

Also I believe certain things like IT gear are 100% deductible straight off.

Don't quote me on these matters though. It's what I have been told by the tax office and how I work.
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Re: Tax Categorises

Postby poliopete » Mon Jan 14, 2019 8:50 am

Like Peter, I regularly contacted my local tax office for clarification, in the main, found them helpful :D
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Re: Tax Categorises

Postby Steve N » Tue Jan 15, 2019 2:30 pm

get an Accountant, start getting it right from the outset
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Re: Tax Categorises

Postby prospero » Tue Jan 15, 2019 5:04 pm

Steve N wrote:get an Accountant, start getting it right from the outset


Anyone had a 'random' investigation? :| I have and after having all my account books/bank statements/old cheque books for about
a year and subsequently giving a thorough third degree, they concluded that I was due a repayment. :lol:

Anyway, after all the argy-bargy I asked the senior inspector if I would be better if I had an accountant. He replied not really. My supplied figures
were fine even if they were not in accountantese and that I would have just as much paperwork, not to mention the expense.
And added that if anything was amiss it would be me that got dropped on and not the accountant. :roll:

I can see the value if you employ staff and run a reasonably large business, but for a one-man business it can be an unnecessary extravagance.
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