Business Accounts - How to handle the tax man [Archive]

Magsite

11th November 2005, 13:19

Hi all

I've just started and opened a business account in order to pay any commisson cheques I earn and to keep it all seperate from my current account and normal income.

I will use this business account for outgoings such as adverts and promotional material for my lottery syndicate Op.

My question is should I now change my home broadband payment to this account?

As I need the internet to run my business I think this is acceptable and may help me lower the tax bill at the end of the year.

Can you reply with items I may have not thought about that I should be paying with the business account.

Cheers
LISA

James Smith

11th November 2005, 15:59

Lisa,

It sounds as if you are a sole trader. If so it doesn’t actually matter if your broadband is paid by you personally or goes through your business bank account, it will still be available as a business deduction if this is a genuine business expense at the end of the year. (It’s more complicated if you are a small limited company)

The key to getting as much deducted as possible is to keep very good records of your income and expenditure. If you like excel I have some basic excel spreadsheets you can use. Drop me an email if you would like me to send you one. Blatant plug alert, I also have a paid for ebook on my website about how to keep your records in a lot more detail.

The best thing to do is record everything you think might be business related, and then keep aside the "iffy" ones with your accountant at the end of the year. They should be able to suggest what else you can put in and what you really shouldn’t be claiming. Generally with home office costs there is no "one size fits all" answer, it tends to be a case of looking at how big the business and how much will "appear reasonable" at the end of the year, ie its a judgement call based on how much time you spend on your business and what proportion of your home is used for it. One of the tests for a shared cost is if the cost has increased as a result of your business. E.g. if you got broadband just after you started your business, and it is mainly for that purpose you will probably be ok. If you have (say) had broadband for 2 years, and just started up, the broadband probably wouldn’t be seen as a business expense as your household costs haven’t increased as a result of your business activity.

Hope that makes some sense.

Regards,