Expense or Asset?

[compyou]

Hi everyone, trying to get my head around the new world of self employment and I have a few questions on some items where I'm not sure if I put them through as an expense or asset.

I bought an ipad and laptop to use only for my business the values were both under £300 do I put them down as an expense or asset?

Also what stock items, I work in IT and bought a few USB pen drives would I put them down as an expense or stock asset?

The same for parts, if I had to buy a new hard drive for a customer for example would that be an expense or stock?

Thanks

 

[Scalloway]

I bought an ipad and laptop to use only for my business the values were both under £300 do I put them down as an expense or asset?

Strictly speaking they are assets but some businesses would not bother capitalising something bought for that price.

Also what stock items, I work in IT and bought a few USB pen drives would I put them down as an expense or stock asset?

If they are for use in the business or just being given away they are an expense. If they are for resale they are stock.

The same for parts, if I had to buy a new hard drive for a customer for example would that be an expense or stock?

If they are for resale they are stock. When you sell them they move from stock to purchases for resale.

 

[Millerd]

Although you buy "capital" items (ipad and laptop) for your business you are permitted to write them off as an expense using with the Annual Investment Allowance.
If you are buying and selling items in the same accounting period just expense them to Cost of Sales. There would only be a requirement to include them in stock at the year-end if they haven't been sold.
If you are running a stock system then you can manage goods you buy for resale through this system. But with a sole proprietor business, I wouldn't bother!

 

[compyou]

Strictly speaking they are assets but some businesses would not bother capitalising something bought for that price.



If they are for use in the business or just being given away they are an expense. If they are for resale they are stock.



If they are for resale they are stock. When you sell them they move from stock to purchases for resale.

When it comes to my tax return can I add this amount to my expenses amount or does it have to be entered into the AIA box?

So would a part for a customer that I buy first come under as an expense? For example a faulty hard drive on a PC needed to be replaced, I order the part for the customer and they pay for the job.

Thanks

 

[Millerd]

The discussion about the value of a "capital" item that can be written off is actually a matter of interpretation. It depends!
There is also the added technical hassle of the AIA where strictly you have to apportion personal and company use.
Pragmatically I would write the small "capital" items (ipad/laptop) off to expenses and not open the AIA can of worms. Likewise I would expense (Cost of Sales) items that I resell.
I recommend you read the book Profit First by Mike Michalowicz.

 

[Scalloway]

There is also the added technical hassle of the AIA where strictly you have to apportion personal and company use.

If there is personal use you still need to make an adjustment if you expense them.

 

[Millerd]

If there is personal use you still need to make an adjustment if you expense them.

This is the problem with "accounting" for small business - too much interpretation and wasting time on technical, relatively insignificant issues.
Be reasonable and if the tax authority has any hassles with what you submit they'll soon tell you!

 

[STDFR33]

This is the problem with "accounting" for small business - too much interpretation and wasting time on technical, relatively insignificant issues.
Be reasonable and if the tax authority has any hassles with what you submit they'll soon tell you!

Wow.

 

[Energise Accounting]

The I pad etc to use in the business is a asset.

This is the problem with "accounting" for small business - too much interpretation and wasting time on technical, relatively insignificant issues.
Be reasonable and if the tax authority has any hassles with what you submit they'll soon tell you!

The tax man will only let you know when they do an inspection If there is a problem, not when you submit your return. And the tax mans view is quite simple you have filed your tax return correctly or incorrectly

With MTD around the corner HMRC reckon they can raise around 18.6 billion and it is not from the likes of Google they wish to collect it.

If the correct treatment is to claim capital allowances that is what should be done it really is not that much hassle.

 

[paulears]

My understanding is that IT depreciates so quickly that as a capital item it will have been scrapped before it has a chance to appear on next years paperwork. My previous accountant treated every purchase (almost) as capital equipment, and then the accountancy charges for monitoring it's journey to zero worth actually cost me, and when my new accountant took over he produced a big list of items, of which 95% didn't even exist any longer. He wiped these out and now fast depreciating or quickly scrapable purchases are not treated as capital items - only those with appreciable life and sensible value. Computer/IT value can be wiped out before you even sell the damn stuff!