Capital Introduced

SomeGeezer

Good Morning All,

If I spent 2k on sample products for my business on my personal credit card and then sold some of those samples for the price I paid for them, would I be charged any personal tax if I withdrew that exact same amount back which was originally "introduced" out of the business account and paid it back on to my credit card?

Hope that makes sense!?

Thanks in advance.

paulwf

Sole trader or ltd?

SomeGeezer

Sole trader, Paul.

fengirl_2

As a sole trader, you pay tax on your profits, not on your drawings. From your example, you are selling these items for what you paid for them, so there would be no profit. My question would be, why bother?

SomeGeezer

fengirl wrote: »

As a sole trader, you pay tax on your profits, not on your drawings. From your example, you are selling these items for what you paid for them, so there would be no profit. My question would be, why bother?

Because they were purely samples to pass on to potential customers. Loss leaders if you will. Luckily, one of the first potential customers liked them so much he bought all the other samples.

With regards to your post, could you expland a little please as I'm a bit of a dullard.

If what you are saying is correct, then if my company makes 50k of profit in the first year and I take it all in drawings, then no tax will be payable? Or do you pay tax on all profits first before any drawings are taken?

Ste_C

SomeGeezer wrote: »

If what you are saying is correct, then if my company makes 50k of profit in the first year and I take it all in drawings, then no tax will be payable? Or do you pay tax on all profits first before any drawings are taken?

You pay tax on profit regardless of what you take out in drawings. Drawings have no effect on profit.

cavework

Any drawings from your business ie wages for yourself are included in taxable profits at the end of the tax year. This is because you are not PAYE but self employed.
Your accountant should be able to offset the credit card payment made for the samples as a loan to the business which was then repaid to the lender .. ie you.
Can I ask why you personally paid for these samples rather than buying them through the business in the first place?

SomeGeezer

Cavework, because it's a brand new business and I didn't have any capital. The only way of paying for these samples was by my personal credit card.

Thanks everyone.