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• # 83142
• Mon 11 Jun 2012 12:41 PM

When a ST earns less than his tax allowance, but has some expenses and a capital item what is the best way to deal with it.
The client I am refering to earned less than £7,000 in 2011/12 when doing work on PAYE  and CIS so all his tax will be refunded.
However he has about £600 in expenses and a capital item of £3,500.
Would it be best to put it all through next year in 2012/13 when he will have done a full year?

Any assistance appreciated


Thank You

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• # 83232
• Fri 15 Jun 2012 12:52 PM

Hi,

First of all you need to prepare the annual accounts for the sole trader's business. These will be made up to his accounting date eg. 31 December. So all income and expenses relating to that accounting period must be included. You cannot choose which accounting period to recognise them in.

Secondly you must include the profits for the 12 month accounting period (usually the one ending in the tax year - but you need to refer to HMRC's rules) which ends in the tax year, so the year ending 5 April 2012 in the self employment section of the self assessment tax return. 

You can claim capital allowances in respect of the capital item on the tax return - you will need to check the rules for this.

Then if the person also has employment income, you need to include the employment income (Per his P60/P11d) for the year ended 5 April 2012 in the employment pages.

(and of course complete any other pages which are relevant to his circumstances).


I'm afraid I am not 100% sure on what you are trying to do from the details provided, but I hope this is of some help.

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• # 83237
• Fri 15 Jun 2012 04:08 PM

Hi,

Yes in that situation as Jude says, you will still have to claim the expenditure in the accounting period it is incurred, which would result in a loss for the year.


As the ST income  is less than his personal allowance and all tax deducted for the year will be refunded,  you would have to carry forward the loss against the next years profit.

As regards the capital equipment you cannot create or increase a loss with capital allowances.  You would therefore not make a claim for the capital equipment until the following tax year.



I hope this helps.

Best wishes



Rosemary           

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