Claiming back expenses?

[madebymeforyou]

hi aall just a quick question regardingreceipts etc
I've been keeping all receipts that contain any purchases to do with my business. My friend said the other day that she only claims on those that she hasn't priced into her work. Ie if I bought a notebook to alter and then sell then I shouldn't claim on notebook/papers etc as they are calculated into the price.

Is that right?..
also what reason am I keeping receipts for? To claim back tax, if I have a vat receipt or just to work out expenses. I'm a little confused. As I've just started I don't want to forget to keep something and get told off!


Thanks guys x

[Caroleecrafts]

You are keeping receipts etc and sales amounts to enter onto an annual tax return which the HMRC will send you every April along with your online code if requested when you registered for a business. They will also advise you about your class 2 nic, it could be if you anticipate the turnover to be less than I think about £4k you can get an excemption. Every item that you use in your work can be include as costs, so if you make a notebook to cover the cost of the notebook and materials are allowable. Not sure what your friend is on about here.

[greannancrafts]

Every time you make a purchase - ask yourself " would I be spending this if it wasn't for my business" If the answer is no, then it is a business expense.

If you are at a craft fair - keep stall receipt, mileage to and from, if you purchase lunch that can be set against your business as subsistence (provide you get a receipt)
You can also claim a small amount for home usage, heating lighting, telephone, computer costs etc

HMRC run 1 day courses to help you understand what you can and cannot claim - check out your local office and get on one.

No of us want's to be paying more tax than we have to:-)

Jane

[AnnieAnna]

You are keeping the receipts because the Tax Man can knock on your door at any time (I've been told and know someone it's happened to) and ask to see all the evidence for all the figures you have put into your tax return.
It's quite a good idea to organise your receipts (I put them in envelopes with the month written on). You might need to rummage for one to remind yourself of the cost of something or the tax man might want to check something. You'd both find it very annoyingto be presented with a carrier bagful of jumbled receipts to wade through.

You can keep receipts for anything but there's no point. What you need to keep tabs on is anything that is tax allowable. That 1 day course offered by the HMRC really helps you out with that so do go when it's offered.

In your notebook example the note book goes under the heading of materials. Materials are tax allowable. Keep the receipt.

And... I think your friend may be paying more tax than she needs to .

[soyofthenorth]

With the notebook, it depends on what has happened to it. If you have bought it and it is not yet sold, it is an asset and not an expense. Once you have sold it, what it cost you to buy it becomes an expense called Cost of Goods Sold.

[greannancrafts]

With the notebook, it depends on what has happened to it. If you have bought it and it is not yet sold, it is an asset and not an expense. Once you have sold it, what it cost you to buy it becomes an expense called Cost of Goods Sold.

Is it an asset - or is it stock?

[soyofthenorth]

Is it an asset - or is it stock?

Stock is an asset, normally called a current asset.

[nattynetty]

With the notebook, it depends on what has happened to it. If you have bought it and it is not yet sold, it is an asset and not an expense. Once you have sold it, what it cost you to buy it becomes an expense called Cost of Goods Sold.

I would've put it down as an expense (ie it goes in the column for money spent) and then if it hasn't sold by the end of my tax year it would show up in my stock take.

[soyofthenorth]

You may have spent money on it but your business hasn't lost anything since you now have something worth the same amount as the money you spent. At least that's the way I was taught when I did accounting classes.

[sunrise]

Hi I am the ' friend ' in the original post I was told a few years ago that say for example I make a card and it sells for £1.50 and it has cost 50p to make then I put the 50p down as costs and the £1 would be profit so my expenses to make this card would be 50p so therefore I would only pay tax on the £1 if that makes sense ???

[Caroleecrafts]

That is right Tracey the original post did not read like that, however, how it works is you enter the receipts for the raw materials of 50p in say Jan then sell the card in May and enter the full amount of £1.50 as a sale. If your tax return is filed in June then the 50p is offset against the £1.50. If your tax return is Apr, you would have put the 50p cost of materials on that tax return then the sale of £1.50 goes as a receipt in the following year. To access profit yes the way you have done it is fine but normal book keeping you tallyup the debits and credits as you go along. You can also write back the cost if the years overlap and unsold

[sunrise]

thanks caroline I do my book keeping spread sheets monthly just wanted to make my post simple to understand I probably didn't explain it to my friend very clearly but we only see eachother at work and its always manic lol