Sole trader looking to close business & remaining stock

[Leew2143]

Hi there,
I’m a sole trader & thinking about giving up the business.
With a stock value of about £1000. Could I give it away or donate to charity?

How would that work in regards to final Accounts?

Regards

 

[Scalloway]

When you paid for it the cost would have gone to your expenses. My opinion is that there is nothing else to do for your accounts.

 

[Hunter1973]

Hi there,
I’m a sole trader & thinking about giving up the business.
With a stock value of about £1000. Could I give it away or donate to charity?

How would that work in regards to final Accounts?

As a sole trader, your non-cash charitable donations are generally treated as
personal "drawings" and are not an allowable business expense. However, specific rules and tax benefits apply depending on what you donate.

Donating Trading Stock
If you donate goods that your business makes or sells (trading stock), you can claim the cost of these goods as a business expense:

• You should not include the value of the gifted items in your sales income.
• You can still deduct the cost of the goods when calculating your business profits for tax purposes.
• If you are VAT-registered, you must account for VAT on the donated goods at the appropriate rate. However, you can zero-rate the VAT if the charity intends to sell, hire out, or export the goods, provided you get an eligibility declaration from the charity.

Donating Equipment/Assets
If you donate equipment (e.g., computers, tools) that was used in your business:

• You cannot treat the donation as a standard business expense.
• You can claim Capital Allowances on the cost of the equipment.

Donating Land, Property, or Shares
You can donate land, property, or shares in another company (not your own business's shares) and receive tax relief:

• You will not pay Capital Gains Tax on the donation.
• You can deduct the market value of the gifted assets from your total income in your Self Assessment tax return to receive income tax relief.
• You must obtain a certificate from the charity acknowledging the donation and keep detailed records for at least 6 years.

Accounting Entry
In your business accounts, record the value of the donation as personal drawings (or a non-business transaction), with the exception of the specific items above (trading stock, equipment, property) where specific business-related tax treatments apply.

Claiming Tax Relief as an Individual
For most donations, the tax relief is claimed through your personal Self Assessment tax return, generally using the Gift Aid scheme. This allows the charity to claim an extra 25p for every £1 you donate, and if you are a higher or additional rate taxpayer, you can claim the difference between the basic rate and your higher rate of tax relief. You must have paid enough tax in the year to cover the amount the charity reclaims.