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Where Taxpayers and Advisers Meet

General business expense: queries

teo77
Posts:5
Joined:Fri Nov 19, 2010 3:02 pm
General business expense: queries

Postby teo77 » Fri Mar 18, 2022 9:37 am

Good Morning,

Simple question (forgive me if something similar might been already asked, but a quick 'search' didn't bring up anything similar):
I am a sole trader in construction, and do a simple self employed tax return myself (no accountant, tax year April to April); what I have normally done so far is that I claim my business expenses (capital etc) each year in between that time period (tools, vehicles etc etc), with receipts of expenses to prove everything.
Would it be possible to claim an expense (lets say a particular tool) outside for the current tax year?
Tax year 2022/2023, item purchased close to tax year end of 2021/2022.
My understanding is that it is not possible, just double checking if there was something that would allow for something like this?
Thank you very much.

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: General business expense: queries

Postby robbob » Fri Mar 18, 2022 10:02 am

Tax year 2022/2023, item purchased close to tax year end of 2021/2022.
It depends on the method you use for calculating your buisness profits do you use normal accruals method or the cash basis ?


Note when you submit your own tax returns the onus is on you to 100% fully understand the rules and comply with complicated instructios as they are laid out - hmrc do not sanity check anything normally unless they open a specific enquiry into your return.


In summary you cannot expect to understand anything with "quick check" your need to go through the detailed relevant instuctions unforunately.

I would highly recommend at a minimum getting accountant to do detailed check on your processes at least once every 5 years to ensure you are doing things right - eg adjuting appropriately for non buisness element of mixed use expenses.

teo77
Posts:5
Joined:Fri Nov 19, 2010 3:02 pm

Re: General business expense: queries

Postby teo77 » Fri Mar 18, 2022 10:29 am

Thank you for your quick reply.
I indeed forgot to add that I use cash basis; this suited me until now since the volume of business generated from self employment was very low (3 to 4 k a year, hence I was not using an accountant).
(This might change from the next tax year, as the volume of business looks to be substantially bigger, and as you mentioned it will be trickier to follow properly)
Thank you very much for the suggestions, much appreciated!

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: General business expense: queries

Postby robbob » Fri Mar 18, 2022 12:26 pm

On cash basis you must make the claim in year as you are claiming equpmnet in the same manner as nomrla expenses not via "capital allowances"
Unlike traditional accounting, you claim other equipment you buy to keep and use in your business as a normal allowable business expense rather than as a capital allowance.

https://www.gov.uk/simpler-income-tax-cash-basis/income-and-expenses-under-cash-basis


Note if you were on normal accruals method - claim would be via "capital allowances" - you could then chose not to claim your eligibale aia (full cost of plant) - you would then have the balance carried forward for future claims either at the normal writing allowance rtae (18% most likely) or you may qualify for full claim if you are eligible for small pool w/off. It gets pretty technical here particualrly if an asset has "private use" as asset does not go in general pool. HMRC would always be mindful that someone earning peanuts as sole trader with alot of "tool time" type plant may actually be using that plant for other non trade purposes too !!


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