|
Disallowable expenses
|
|
Thu 10 May 2012 03:58 PM
|
Kate_Brown
Associate CB.Cert PM.Dip
Practice Licence
73 posts
|
I'm sure there's an obvious answer to this, but I cannot get my brain around it at the moment! I'm doing the bookkeeping for a sole trader, but she has someone else who does her tax return. She's given me an invoice for a course she's been on, which I consider disallowable for tax purposes because it's learning a new skill. Does it still go in her accounts, for the accountant to separate out as a disallowable expense on her tax return?
I'm in a similar position with my own business, and had concluded that I would pay for courses out of my personal bank account, and not enter them in my business accounts at all. What is the correct way to approach this?
______________________
Kate Brown
Stenson Office Services - bookkeeping, VAT, payroll and CIS for small businesses
www.stensonoffice.co.uk
|
|
|
|
|
Mon 04 Feb 2013 12:12 AM
|
Synergy Bookkeeping
Associate CB.Cert
Practice Licence
23 posts
|
Kate_Brownsaid:
“I'm sure there's an obvious answer to this, but I cannot get my brain around it at the moment! I'm doing the bookkeeping for a sole trader, but she has someone else who does her tax return. She's given me an invoice for a course she's been on, which I consider disallowable for tax purposes because it's learning a new skill. Does it still go in her accounts, for the accountant to separate out as a disallowable expense on her tax return?
I'm in a similar position with my own business, and had concluded that I would pay for courses out of my personal bank account, and not enter them in my business accounts at all. What is the correct way to approach this?”
Hi Kate,
You pay all from your own personal account until you are qualified until then all the course fees ref to next level could be claimble from your business.
Hope it helps.
Regards
Synergy Bookkeeping Services, Bath
www.synergybookkeeping.co.uk
______________________
Kind regards
Serkan
Synergy Bookkeeping Services
www.synergybookkeeping.co.uk
|
|
|
|
|
Fri 08 Feb 2013 11:24 AM
|
Kate_Brown
Associate CB.Cert PM.Dip
Practice Licence
73 posts
|
Thanks for your reply - my question was actually whether the expense should appear in the accounts, though, rather than how it should be paid for. I had already decided that it wasn't a business expense, I just wondered whether or not it should appear in the accounts as a disallowable expense, or left out of the accounts entirely.
______________________
Kate Brown
Stenson Office Services - bookkeeping, VAT, payroll and CIS for small businesses
www.stensonoffice.co.uk
|
|
|
|
|
Fri 08 Feb 2013 12:05 PM
|
Synergy Bookkeeping
Associate CB.Cert
Practice Licence
23 posts
|
Kate_Brownsaid:
“I'm sure there's an obvious answer to this, but I cannot get my brain around it at the moment! I'm doing the bookkeeping for a sole trader, but she has someone else who does her tax return. She's given me an invoice for a course she's been on, which I consider disallowable for tax purposes because it's learning a new skill. Does it still go in her accounts, for the accountant to separate out as a disallowable expense on her tax return?
I'm in a similar position with my own business, and had concluded that I would pay for courses out of my personal bank account, and not enter them in my business accounts at all. What is the correct way to approach this?”
Hi Kate,
Personally i would ask this to the person who does the tax returns. She/he would point you to the correct direction.
And it is always to show disallowable cost in the accounts and in the tax returns as it kind of assures the taxman and more impoprtantly it is a good thing to know those cost in a management accountancy perpective.
All the best
Serkan
www.synergybookkeeping.co.uk
______________________
Kind regards
Serkan
Synergy Bookkeeping Services
www.synergybookkeeping.co.uk
|
|
|
|
|
Fri 08 Feb 2013 12:58 PM
|
kjmcculloch
Member CB.Dip PM.Dip
Practice Licence
725 posts
|
Hi Kate,
I'm going to disagree slightly with what has been said already. The key to training is whether you are learning a new skill or updating an existing skill.
A new skill should be treated as a capital expense and updating a skill would be a revenue expense. Both should be entered in the accounts of the business if it is clear they are business expenses, taking into consideration the possibility of duality of purpose. The adjustment is then made when the self assessment is completed by removing the capital expense for which there is no allowance.
This is in line with HMRC guidance in BIM35660 and BIM42526.
Regards
Kris
Edited at 08 Feb 2013 01:01 PM GMT
______________________
Kris McCulloch
www.kmbookkeeping.co.uk
Winner - BKN Most Innovative Accountancy Firm 2012
|
|
|
|
|
Sat 09 Feb 2013 11:41 AM
|
betty
Associate CB.Cert
Practice Licence
31 posts
|
Hi Kris
Totally agree with what you have said.
However, the two tax returns that I completed this year were for sole traders who were eligible to complete the self employed short form. One of the sole traders had completed a course which after looking into the relevant legislation I decided was a capital rather than a revenue expense so therefore disallowable. I had to leave the course out of the return altogether as the SA103S doesn't have "disallowble" boxes.
Elizabeth
|
|
|
|
|
Mon 11 Feb 2013 04:09 PM
|
Synergy Bookkeeping
Associate CB.Cert
Practice Licence
23 posts
|
kjmccullochsaid:
“Hi Kate,
I'm going to disagree slightly with what has been said already. The key to training is whether you are learning a new skill or updating an existing skill.
A new skill should be treated as a capital expense and updating a skill would be a revenue expense. Both should be entered in the accounts of the business if it is clear they are business expenses, taking into consideration the possibility of duality of purpose. The adjustment is then made when the self assessment is completed by removing the capital expense for which there is no allowance.
This is in line with HMRC guidance in BIM35660 and BIM42526.
Regards
Kris
Edited at 08 Feb 2013 01:01 PM GMT”
Hi
Last year I had attended a workshop at HMRC.
We were told that there is no capital expenditure for a small sole trader in that sense – ( a course to get the skills up and running the business and later to train continuously. )
The cost for the 1st step is not tax allowable. I am pretty sure a plumber was the example..
To become a plumber you need to qualify first. To get this qualification you need to pay up and this cost is not tax allowable.. Later you are asked to keep up with the practice then the plumber goes to next course and the cost of this cost is tax allowable including the travel cost and the accommodation cost if need be.
Hope all is clear now.. Furthermore a small sole trader does not need to show capital or revenue expenditure in his books, it is only a 3 line number.. Revenue, Cost and Profit.. It is simple as that.
Any question please give me a shout.
Best regards
Serkan
www.synergybookkeeping.co.uk
______________________
Kind regards
Serkan
Synergy Bookkeeping Services
www.synergybookkeeping.co.uk
|
|