Partnership tax stuff for non-accountants !!!

[Deleted User]

Help. Gotta do tax return for partnership.

I've kept a spreadsheet for income and outgoings etc but I understand its more complicated than that with stock holdings/depreciation etc.

I'm led to believe that partnership profit for tax return will be income + value of assets (stock) - outgoings

Income is straightforward enough. Our costs are insurance (easy enough?), stock (99% of which is consumable - i.e. used on customers), travel (40p mile?). Apart from that we spent a little on advertising, and bought a laptop.

So April 2010, I know how much we'd spent and how much we'd earned that year. Not sure how much stock we had at that point. Also, what about the laptop, doesnt depreciation come into play here rather than a one-off cost?

Help !!!!! Surely not everyone can afford an accountant to do this for them?

chrismac1

The costs of not having one can often end up higher. This one sounds like fees would be low. On to your points:

Travel at 40 pence per mile.
Laptop will qualify for 100% capital allowance - but take care! Much depends on the circumstances of each partner. As an "allowance" you have the option to claim it or not. You might well decline this option if it means one or other of the partner ends up wasting his or her tax-free 6,475 allowance. This depends on the rest of your income and allowable expenses.

You don't say what the partnership does, where it is run from, etc. You don't mention rental expense so sounds like you're doing this from home, there is an expense you can claim there if so.

There is more to it than this also - but that should do for now.

[Deleted User]

chrismac1 wrote: »

The costs of not having one can often end up higher. This one sounds like fees would be low. On to your points:

Travel at 40 pence per mile.
Laptop will qualify for 100% capital allowance - but take care! Much depends on the circumstances of each partner. As an "allowance" you have the option to claim it or not. You might well decline this option if it means one or other of the partner ends up wasting his or her tax-free 6,475 allowance. This depends on the rest of your income and allowable expenses.

You don't say what the partnership does, where it is run from, etc. You don't mention rental expense so sounds like you're doing this from home, there is an expense you can claim there if so.

There is more to it than this also - but that should do for now.

No business premises. Work from home - its aesthetics (i.e. botox etc) business.

Bit confused about laptop capital allowance. How does this work? Is it not just a business expense? i.e. cost £200

How does this affect personal allowance then?

runninglea

First 10,000 miles @ 40p then lower

Computer could put to repairs as only £200, there is a box where you can put private use in i.e 30% etc

You can claim 'use of office at home' on a wekly basis i.e £30/week

chrismac1

yes, just write off laptop as "small equipment expensed".

care is needed if you claim over £3 per week for use of own home.

Pennywise

Re stock, if you didn't do a stock take and don't have any stock records around that time, you'll have to make your best estimate of how much stock you're likely to have had. HMRC will accept reasonable estimates as long as you've done your best. You'll have to look at your purchase invoices and make your best guess as to how much of each invoice was left at the year end. You can also check backwards by looking at your sales records after the year end. By working in both directions, you should come to a reasonable guesstimate of your year end stock.

As an alternative, you could do a long first accounting period, say to the end of November, do a proper stock take as at 30/11/10 and then pro-rata your profits/loss for the full year and a bit and declare the time-based proportion on your 09/10 tax return.

Re prepayments, you have to consider whether any overheads, etc were "pre-paid" at the year end, i.e. paying in advance for say advertising in Yellow Page. If you paid £1,000 for the 2010 calendar year, then 3/12 of that falls in 09/10 and 9/12 in 10/11. The opposite applies with accruals where something you have used in the year isn't billed until after the year end, i.e. billed quarterly in arrears for telephone.

Don't forget that accounts and tax are on the "accruals" basis - i.e. it's not based on monies paid and received in the year, it's based on when the goods & services were sold/used, so you have to include unpaid sales and purchases invoices.

Of course, all the above only applies where "material" - i.e. in the bigger picture, does it matter? So if your advertising in Yellow Pages was only £120, you probably wouldn't need to prepay the £90, but if it were £1,200, you probably would need to prepay the £900. Same applies with stock - if it's worth hundreds or thousands, you have to adjust for it, but if it's only £50 then probably not.

All the helpsheets etc to explain all this are on HMRC's website - probably wise for you to spend a couple of hours looking at them to improve your understanding of how accounts and tax work. Alternatively, just get an accountant - shouldn't cost you too much if your book-keeping is up to standard and they'll almost certainly find a few things you hadn't thought about which will go along way to covering their bill.

[Deleted User]

runninglea wrote: »

First 10,000 miles @ 40p then lower

Computer could put to repairs as only £200, there is a box where you can put private use in i.e 30% etc

You can claim 'use of office at home' on a wekly basis i.e £30/week

Laptop actually cost about £250 I think. As such, could I claim as a one-off expense?

Do I have to declare any private use?

Interesting about use of office at home. Can I really claim a nominal figure of £30/week ???

[Deleted User]

Pennywise wrote: »

Re stock, if you didn't do a stock take and don't have any stock records around that time, you'll have to make your best estimate of how much stock you're likely to have had. HMRC will accept reasonable estimates as long as you've done your best. You'll have to look at your purchase invoices and make your best guess as to how much of each invoice was left at the year end. You can also check backwards by looking at your sales records after the year end. By working in both directions, you should come to a reasonable guesstimate of your year end stock.

As an alternative, you could do a long first accounting period, say to the end of November, do a proper stock take as at 30/11/10 and then pro-rata your profits/loss for the full year and a bit and declare the time-based proportion on your 09/10 tax return.

Re prepayments, you have to consider whether any overheads, etc were "pre-paid" at the year end, i.e. paying in advance for say advertising in Yellow Page. If you paid £1,000 for the 2010 calendar year, then 3/12 of that falls in 09/10 and 9/12 in 10/11. The opposite applies with accruals where something you have used in the year isn't billed until after the year end, i.e. billed quarterly in arrears for telephone.

Don't forget that accounts and tax are on the "accruals" basis - i.e. it's not based on monies paid and received in the year, it's based on when the goods & services were sold/used, so you have to include unpaid sales and purchases invoices.

Of course, all the above only applies where "material" - i.e. in the bigger picture, does it matter? So if your advertising in Yellow Pages was only £120, you probably wouldn't need to prepay the £90, but if it were £1,200, you probably would need to prepay the £900. Same applies with stock - if it's worth hundreds or thousands, you have to adjust for it, but if it's only £50 then probably not.

All the helpsheets etc to explain all this are on HMRC's website - probably wise for you to spend a couple of hours looking at them to improve your understanding of how accounts and tax work. Alternatively, just get an accountant - shouldn't cost you too much if your book-keeping is up to standard and they'll almost certainly find a few things you hadn't thought about which will go along way to covering their bill.

OK. I guess I might have to estimate the stock.

As for advertising that was all a one-off cost. i.e. one off adverts, payments for promotional materials etc.

Also, for income, all of that is paid to us a point of sale so no outstanding invoices etc.

For last year, because we had some high start up costs and business was pretty slow, we didnt make anything up till April 2010. Assuming start up training costs are an allowable business expense? (That cost almost £1000!!!)

I see the SA800 form only asks for total income and total expenses. No mention of stock etc.

Just wondering if, this year, I can get away with just a simple income and expenses totals (which I have)?

To be honest, even if we had some stock in on April 5th it wouldnt be much - £500 at most and I'm fairly sure we made more than £500 loss that year.

As for the accountant thing, how cheap would an accountant be able to do this for? Our turnover is less than £10K a year at the moment and it looks like we'll be lucky to make £2-3K profit so I dont want to spend much !!!!

runninglea

Stock would come of your purchases figure:-

Income 10,000

Purchases (8,000 less stock 500) 7,500

Mileage (1000 @40p) 400

Repair (computer) 250 * 70% 175
30% personal

Training, Advertising etc 1,000

Use of Home (52 * 10) 520

Profit 405


For example - also what are you paying yourselves

angelpie1000

Paul,

Looks like you've had some great advice already on here, although this can sometimes result in information overload. I would suggest speaking to a few accountants to gauge how much they would charge to do this for you. Not only would you have the piece of mind that someone else was dealling with it, but it would free up your time to actually run the business.

Find the numbers for some accountants near you (look at qualified ones only though - anyone can call themselves an accountant). My advice would be to speak to smaller firms or one-man bands. They are likely to offer a more competitive price. Most also offer a free consultation, take a few up on this and pick the one you get on best with.:beer:

Good luck

Karen

[Deleted User]

runninglea wrote: »

Stock would come of your purchases figure:-

Income 10,000

Purchases (8,000 less stock 500) 7,500

Mileage (1000 @40p) 400

Repair (computer) 250 * 70% 175
30% personal

Training, Advertising etc 1,000

Use of Home (52 * 10) 520

Profit 405


For example - also what are you paying yourselves

Not paying ourselves anything - not made any money yet !