Hobby into business

Red_Gaz_2

Hello guys, first post on here.

I'm contemplating earing a bit of money in my spare time next year as a sole trader doing something that is currently a hobby. Eventually I would like to turn it into full-time employment. I currently have a full time job.

My question is, I have bought over the years some reasonably expensive equipment/tools, some I have receipts for, some I don't. Will I be able to claim these as business costs, and if I can then what about the items I don't have receipts for?

Any help much appreciated.

Horace

If you have bought the items over the years then there is depreciation to take into consideration and these are items that the HMRC will have considered that you had already and that you now use them for business purposes. Remember if you are setting up as self employed (you can remain employed too) then you need to contact the HMRC - they are friendly and helpful https://www.hmrc.gov.uk - ask for the self employment team.

If you buy new equipment after your self employment period has commenced then these items will be classed as part of your capital allowance and be a business expense.

Red_Gaz_2

Horace wrote: »

If you have bought the items over the years then there is depreciation to take into consideration and these are items that the HMRC will have considered that you had already and that you now use them for business purposes. Remember if you are setting up as self employed (you can remain employed too) then you need to contact the HMRC - they are friendly and helpful - ask for the self employment team.

If you buy new equipment after your self employment period has commenced then these items will be classed as part of your capital allowance and be a business expense.

Thanks for your prompt reply. So I can claim a percentage of the cost? I bought most second hand so would this be a percentage of the cost new or what I paid for them?
Do I need to produce receipts for them all?

Thanks again.

fengirl_2

What you are talking about is claiming capital allowances on equipment used in your business, not revenue expenditure. It is usual to treat small capital items costing under £100 as revenue, so they go stright into your profit and loss account. Therefore, if you have anything of this type which was bought some time ago, I think you would have a hard time convincing HMRC that they were recent enough purchases to be included in your first accounts.
Items costing over £100 are normally treated as capital and so are not included in your P&L, but you claim capital allowances on them. If they are items which you have owned for some time, you bring them into your claim at their value on the date you started to trade. Capital allowances are 20% of value, less any privtae use. You wouldn't need receipts, just be ready to justify your value of the items. Don't forget to include other items such as yoour computer and office furniture in your capital allowances pool.

Pennywise

You need to make a list of everything you are "introducing" into your new business and place realistic open market values on them in their current state. I always advise people to take photographs as well to help prove to the taxman what was brought in. My "best" case was where a client started his own car repair business and introduced over £25k of equipment. Of course, the tax inspector didn't believe it, but on advice, the client had photographed it and done a proper inventory and the tax man had to back off because clearly the equipment existed and was clearly in good condition.

Red_Gaz_2

Thanks for your replies.