Postage to customers/Carriage Outwards - cost of sales or expenses?

[dimakenag]

Hello accountants,
We are a small limited company who print and sell tshirts online.
We charge our customers a shipping fee.
We pay to Royal Mail and sometimes couriers to deliver our items to our customers.
Will these delivery expenses would be cost of sales or administrative expenses?
To be precise I am trying to file company accounts through HMRC Pdf software and there are 3 fields for expenses in Profit and Loss:
Cost of sales: AC14
Distribution costs: AC18
Administrative expenses: AC20

Where should I enter our expenses for shipping to our customers?

A similar thread has been on this forums but the opinions there has been different.
Is there any HMRC statement on this?

 

[MOIC]

I'm not an accountant, but would be expenses, not cost of sales.

 

[Philip Hoyle]

Given that you are including the postage paid by the customers in your sales, you should include the cost of providing that postage as cost of sales.

The alternative is distribution costs, but that's more appropriate when you're not recharging the postage/delivery costs.

Can't see how it could be an "administrative" expense which is usually the overall running costs of the company - that's where the postage for sending out bills, or posting the cheques to the bank would be put.

 

[David Griffiths]

I have to disagree with Philip and wouldn't include it as Cost of Sales. I was taught that CoS represents the cost of acquiring and or producing the items that you sell. Distribution and selling costs are excluded. In fact the US term Cost of Goods Sold probably summarises the classification more accurately than the UK equivalent.

The standard Companies Act layouts do include a section for selling and distribution expenses, and that is where the expense belongs, if the amount over the year is material

 

[MOIC]

I have to disagree with Philip and wouldn't include it as Cost of Sales. I was taught that CoS represents the cost of acquiring and or producing the items that you sell. Distribution and selling costs are excluded. In fact the US term Cost of Goods Sold probably summarises the classification more accurately than the UK equivalent.

The standard Companies Act layouts do include a section for selling and distribution expenses, and that is where the expense belongs, if the amount over the year is material

I agree.

 

[GraemeL]

I have to disagree with Philip and wouldn't include it as Cost of Sales. I was taught that CoS represents the cost of acquiring and or producing the items that you sell. Distribution and selling costs are excluded. In fact the US term Cost of Goods Sold probably summarises the classification more accurately than the UK equivalent.

The standard Companies Act layouts do include a section for selling and distribution expenses, and that is where the expense belongs, if the amount over the year is material

I agree also

 

[dimakenag]

Thanks for your opinions, it's really weird that there is no clear statement on this from HMRC.
Anyway if this is not cost of sales, where should I enter this than:
Distribution costs: AC18
or
Administrative expenses: AC20

If it's a distribution costs, than there is another small question.
In corporation tax computations in HMRC Pdf software there is no such field as "distribution costs". In their example accounts and computations however I noticed that they entered the amount from "Distribution costs" (in accounts) to "Vehicle expenses:" (in computations)
http://www.hmrc.gov.uk/ct/getting-started/intro/sample-full-stat-accs.pdf
http://www.hmrc.gov.uk/ct/getting-started/intro/sample-computations.pdf

Is that the right place for the amount?
I don't see where else I could enter shipping/delivery costs in computations for ct600.

 

[MOIC]

Will your accountant not know the answer to this question?

 

[dimakenag]

Will your accountant not know the answer to this question?

As you can see the opinions from different accountants are also different, some accountants say it's cost of sale, another say it's expenses.
I am really confused.
Currently I am still searching good accountant for myself but you know I am the type of the person who wan't to know the right way to check if my accountant will do it right rather than wholly trust him.
After all there should be the law on how this should be treated?

 

[MOIC]

Your accountant will know your specific circumstances and should know his business.

If there is an issue with HMRC then your accountant can handle it.

 

[dimakenag]

Well not what I was helping to hear.

 

[MOIC]

Surely your accountant will know your full circumstances and will also be responsible for auditing your accounts, so any issues he will be responsible for, not advice given by a forum member.

 

[dimakenag]

Ok thanks for your help.

 

[David Griffiths]

Thanks for your opinions, it's really weird that there is no clear statement on this from HMRC.
Anyway if this is not cost of sales, where should I enter this than:
Distribution costs: AC18
or
Administrative expenses: AC20

If it's a distribution costs, than there is another small question.
In corporation tax computations in HMRC Pdf software there is no such field as "distribution costs". In their example accounts and computations however I noticed that they entered the amount from "Distribution costs" (in accounts) to "Vehicle expenses:" (in computations)
http://www.hmrc.gov.uk/ct/getting-started/intro/sample-full-stat-accs.pdf
http://www.hmrc.gov.uk/ct/getting-started/intro/sample-computations.pdf

Is that the right place for the amount?
I don't see where else I could enter shipping/delivery costs in computations for ct600.

You are unlikely to get help on specific boxes on the HMRC forms as most accountants don't use the HMRC free software (with good reason!)