Cost Of Sales or Other Expenses

[Madihah1]

Hi,

I need a little advice.

My husband is a self employed decorator/property maintenance man. Sometimes when he works for clients they ask him to buy the materials for the work to be undertaken and later re-imburse him (as he has a suitable vehicle to carry the items), something he willingly does to secure getting the job. Are the materials classed as cost of sales or other expenses. Also the tools that he buys to carry out his daily work does this go under other expenses or is it classed as cost of sales. Tried looking for clear answers to this but a little confused.

Many thanks for any help

[Merlion ABS]

Yes the materials are classed as a cost of sales however the re-imbursed money he gets has to be classes as income ie, disclose it on the invoice as income.

So say if he charges £200 for the work and then gets re-imbursed £50 for the materials. The invoice should read £250 in total. He keeps the receipts as a cost of sale of £50 and the gross profit is £200 so you are back where it should be at £200.

With regards to tools, grey area. you need to look at whether the tools are consumable, ie paint brushes will only last so long and probably need replacing every month or 2. This can be treated as an expenses.

Tools that have a longer life say more than a year or 2 years then these will be treated as Assets and claim tax relief via Capital Allowances on those tools.

I suggest you go see an accountant as it will be easier and I cant give fully correct answers as I don't know your whole situation so please don't rely on my words as gospel.

[Madihah1]

Many thanks for your advice. Really helped.:)