Directors loan or business expenses?

[Nicz]

Hi,
I have set up a hire business and started trading on 25th Jan. I have been buying stock since 2014. I have spent roughly £1700 in 2014, £1700 in 2015 and £390 in 2016. Obviously, I have all the receipts.I have in effect lent my business money from my personal account. So I don' t know how to account for this on my self assessment return. Do I add all the costs together and say it's a directors loan in the tax year 2016? or do I take off the costs as business expenses in the tax year 2015? or do I do something else?

Sorry for sounding stupid, it's my first time and I don't want to do anything wrong!

Thanks

[jpcentral]

Maybe not what you want to hear but you should really go and discuss your plans with a local accountant. Keeping proper records for a business which hires out equipment and, presumably takes refundable deposits, and probably sells consumables, is not straightforward. If you don't get your record keeping right from the beginning, it can result in all sorts of problems in the future. I had the task of sorting out a mess for someone doing something similar several years ago. It cost them considerably more for us to sort out the incomplete records than it would have done if they'd come to us at the beginning and allowed us to set up a decent record keeping system.

Unless you have set up as a Ltd company, you are not a director so cannot have a director loan account. You may have a drawings account.

The treatment of the items you have purchased will depend on what they are, what they cost, whether or not you have used them.

You say "stock" but is what you have purchased really assets to be used in the business and hired out, or is it a mixture?

Normally for assets/stock introduced into a sole trader business we would take a view about the value at the date of commencement, allowing for depreciation since the original purchase date. However, if you have started buying items with the intent to use them in your new business and they haven't been used for anything else, a higher valuation might be used.

As I said, the treatment might vary depending on what the item actually is.

[bd6759]

I echo the above.

The stuff you have bought does not go anywhere on your self assessment return. You have bought it on behalf of the company. The stuff should be shown as assets in the company balance sheet. The contra entry is a liability to you.