Tax return new business

[karen123]

Hi,

I wondered if anyone could help me? I have been self employed for 10 years and fill in my own tax returns. I work as a cleaner, so it's pretty simple.

I've recently began on a journey to set up my own (glass craft) business. Over the last 3 months I've spent a lot on equiptment etc, but won't be making any money for at least another 6 months.

Firstly, can I lump both my businesses together, whilst I'm doing both, so using my spending on equipment against my tax for the tax year 2008-9? Even though I haven't started selling?

Or can I/should I (this is what I was hoping for) offset the amount spent on equiptment etc when I begin making some money, which will (all going well!) be the next financial year, even though I bought the equiptment the year before?

Thanks in advance

Bonnie

 

[elaine@cheapaccounting]

from your point of view you would complete two self employment supplements.

Any losses on one business can be offset against the other.m See this on losses:

http://www.hmrc.gov.uk/helpsheets/hs227.pdf

The equipment would get capital allowances

 

[Zahidparvez]

Equipment you are buying will be treated as assets which you can be depreciated over time, but you cant charge these as expenses.

 

[elaine@cheapaccounting]

Equipment you are buying will be treated as assets which you can be depreciated over time, but you cant charge these as expenses.

correct but you can get capital allowances and the annual investment allowance means that you get 100% allowances on the first £50k of investment in any one year

 

[karen123]

Thanks for all your replies.
The equipment like the kiln etc, I understand is a fixed asset...
...what about the glass that I buy to make the plates etc? Around half the money has been spent on materials.

 

[Fernhurst Solutions Ltd]

Thanks for all your replies.
The equipment like the kiln etc, I understand is a fixed asset...
...what about the glass that I buy to make the plates etc? Around half the money has been spent on materials.

Hiya Karen, welcome to the forum.

The glass that you buy is a 'cost of sale' and as such is an expense of the business.

 

[taxattack]

Hi,

I wondered if anyone could help me? I have been self employed for 10 years and fill in my own tax returns. I work as a cleaner, so it's pretty simple.

I've recently began on a journey to set up my own (glass craft) business. Over the last 3 months I've spent a lot on equiptment etc, but won't be making any money for at least another 6 months.

Firstly, can I lump both my businesses together, whilst I'm doing both, so using my spending on equipment against my tax for the tax year 2008-9? Even though I haven't started selling?

Or can I/should I (this is what I was hoping for) offset the amount spent on equiptment etc when I begin making some money, which will (all going well!) be the next financial year, even though I bought the equiptment the year before?

Thanks in advance

Bonnie

This requires some thought for the best outcome. There are several considerations.

Losses can be carried forward, but only against profits from the same trade.

Losses in any of the first 4 years of the trade can be set against total income in the previous 3 years, beginning with the earliest year.

A loss can be set against total income for the same year.

The losses usually have to be used in full, which means personal allowances may be wasted. In this case, carry forward may be best, if there is insufficient other income to utilise the losses effectively.

Capital allowances can be claimed on equipment, but need not be claimed in full, or at all, in any tax year, and can be deferred, though usually at lower rates. This can reduce the size of the loss, if desired.

The choice of accounting date may affect how much loss there is in any tax year.

So how to obtain the best result is not a straightforward decision.

Hope this helps, at least a bit!

Chris

 

[Jenni384]

Hiya Karen, welcome to the forum.

The glass that you buy is a 'cost of sale' and as such is an expense of the business.

But if you haven't sold it at the year end, it remains in stock and thus cannot be claimed as an expense in that year.

 

[Fernhurst Solutions Ltd]

Good point ... assumption is the mother of all cock-ups

 

[karen123]

Thanks for all your help. I must admit I feel like burying my head in the sand!
I think (from what you have all told me) that I can carry everything forward to the next financial year, when I will definately be selling my glass - well hopefully, definately! So I can treat the glass as expenses for the next financial year and the kiln I will get 100% allowance for as it is under 50K?

 

[CassioAcc]

Your cost of stock you can claim as an expense is Opening Stock + Purchases - Closing Stock so yes it will be carried forward. The Kiln will get the 100% allowance in the year of purchase.