Accounting for wastage

[pgallon]

I run a small retail business, because it is located in a holiday area it is difficult to estimate the stock level for perishable goods, consequnetly at times we have a fair amount of wastage in terms of pies, bread etc.

It's all vat exempt as it is food but is there a way to claim back the costs as part of my tax return?

Thanks for your help.
Peter
ptr.gallon@googlemail.com

[pawncob]

Surely you claim them already.
I assume you include all your purchases in your accounts, so the claim is automatically made. It's best to keep a note of wastage though, so you can prove that it's not sales, to HMRC.

[Ben Laws]

Yes - providing you have claimed for your purchases, if any of those then waste away you have already claimed for them and do not need to claim for them again!

From a tidy bookkeeping perspective, and I do not know how you are doing your bookkeeping or even if you have any knowledge of double-entry bookkeeping principles, I would be inclined to display your wastage element by crediting your purchase "cost of sales" nominal and the debiting a wastage "expense" nominal.

This shows that you are accounting for wastage not just letting the value of rotting purchases sit there adversly affecting the gross profit on sales over the purchases you can sell.

Some would argue that purchase wastage is a cost of sales, and this is not an unreasonable view to take. However in food industries like yours you may find that your management week to week or month to month accounts will give you a more static GP when the yo yo figures of wastage are removed from the purchases and debited to the wastage expense account.

You may already have to account for waste disposal costs (bins etc) and these wasteage costs could be lumped in with them.

Hope this is of some use.




Ben Laws
Partner
Pearson Laws LLP