Moving business

Deramore12

We currently have an online business which we started in lockdown.  It doesn't make any money BUT WE cover alll costs and any profit goes into improving the range and buying more stock. Its almost therapy for my other half who has suffered with mental illness, this keeps her occupied.

 A slug of our costs are £14k on serviced accommodation.  I have suggested that now we have proved we can tick along slowly expanding we could use that £14k to rent a large house and actually run the business from one of the large rooms.   
Even though we make zero money we would at least get some benefit ftom living somewhere half decent.  
Its not intrusive as its alk online, we have no visitors, although we have one delivery once a month.  Landlord says its fine. 
Is this feasible re business rates ?
I appreciate we can only write off say 20% but we dont pay tax anyway as we dont draw a salary or profits. 

[Deleted User]

You will have to clarify. You have said, in the same sentence, that ‘it doesn’t make any money BUT....any profit goes into improving the range and buying more stock’

That suggests that there is a profit in that you have more and better quality stock at the end of the year than at the start. 

Deramore12

I'll clarify we basically keep ploughing money back into the business and make no drawings and do not take a wage.

[Deleted User]

Deramore12 said:

I'll clarify we basically keep ploughing money back into the business and make no drawings and do not take a wage.

Let’s say that, in your first year, your turnover was 15000 and your expenses 3000. You take all of the 12000 out of the business. Your profit is 12000.

Lets say that, in your first year, your turnover was 15000 and your expenses 3000. You use the whole 12000 to buy additional stock and it has a value at your accounts year end of 14000. You draw no money from the business. Your profit is 14000. 

What you draw (take a wage) from the business is entirely irrelevant in determining profits.

Jeremy535897

[Deleted User] said:

Deramore12 said:

I'll clarify we basically keep ploughing money back into the business and make no drawings and do not take a wage.

Let’s say that, in your first year, your turnover was 15000 and your expenses 3000. You take all of the 12000 out of the business. Your profit is 12000.

Lets say that, in your first year, your turnover was 15000 and your expenses 3000. You use the whole 12000 to buy additional stock and it has a value at your accounts year end of 14000. You draw no money from the business. Your profit is 14000. 

What you draw (take a wage) from the business is entirely irrelevant in determining profits.

Your profit is actually £12,000, because you value stock at the lower of cost and net realisable value (£12,000 rather than £14,000). (If you use the cash basis, and you still hold the stock at the accounts year end, your profit is zero in that first year because you expense it when you pay for it.)

[Deleted User]

Jeremy535897 said:

purdyoaten2 said:

Deramore12 said:

I'll clarify we basically keep ploughing money back into the business and make no drawings and do not take a wage.

Let’s say that, in your first year, your turnover was 15000 and your expenses 3000. You take all of the 12000 out of the business. Your profit is 12000.

Lets say that, in your first year, your turnover was 15000 and your expenses 3000. You use the whole 12000 to buy additional stock and it has a value at your accounts year end of 14000. You draw no money from the business. Your profit is 14000. 

What you draw (take a wage) from the business is entirely irrelevant in determining profits.

Your profit is actually £12,000, because you value stock at the lower of cost and net realisable value (£12,000 rather than £14,000). (If you use the cash basis, and you still hold the stock at the accounts year end, your profit is zero in that first year because you expense it when you pay for it.)

Thank you - I should have remembered that. Maybe leave stock valuations to the accountants? 👍

Jeremy535897

[Deleted User] said:

Jeremy535897 said:

[Deleted User] said:

Deramore12 said:

I'll clarify we basically keep ploughing money back into the business and make no drawings and do not take a wage.

Let’s say that, in your first year, your turnover was 15000 and your expenses 3000. You take all of the 12000 out of the business. Your profit is 12000.

Lets say that, in your first year, your turnover was 15000 and your expenses 3000. You use the whole 12000 to buy additional stock and it has a value at your accounts year end of 14000. You draw no money from the business. Your profit is 14000. 

What you draw (take a wage) from the business is entirely irrelevant in determining profits.

Your profit is actually £12,000, because you value stock at the lower of cost and net realisable value (£12,000 rather than £14,000). (If you use the cash basis, and you still hold the stock at the accounts year end, your profit is zero in that first year because you expense it when you pay for it.)

Thank you - I should have remembered that. Maybe leave stock valuations to the accountants? 👍

Leave the method of stock valuations to the accountants, yes, and they can tell you, for example, that you include home bred sheep in stock at market value less 25%, but don't ask them to come up with an actual stock valuation for 250 ewes on the side of a steep hill in the pouring rain, unless they are farmers or smallholders as well, like me!

[Deleted User]

Jeremy535897 said:

[Deleted User] said:

Jeremy535897 said:

[Deleted User] said:

Deramore12 said:

I'll clarify we basically keep ploughing money back into the business and make no drawings and do not take a wage.

Let’s say that, in your first year, your turnover was 15000 and your expenses 3000. You take all of the 12000 out of the business. Your profit is 12000.

Lets say that, in your first year, your turnover was 15000 and your expenses 3000. You use the whole 12000 to buy additional stock and it has a value at your accounts year end of 14000. You draw no money from the business. Your profit is 14000. 

What you draw (take a wage) from the business is entirely irrelevant in determining profits.

Your profit is actually £12,000, because you value stock at the lower of cost and net realisable value (£12,000 rather than £14,000). (If you use the cash basis, and you still hold the stock at the accounts year end, your profit is zero in that first year because you expense it when you pay for it.)

Thank you - I should have remembered that. Maybe leave stock valuations to the accountants? 👍

Leave the method of stock valuations to the accountants, yes, and they can tell you, for example, that you include home bred sheep in stock at market value less 25%, but don't ask them to come up with an actual stock valuation for 250 ewes on the side of a steep hill in the pouring rain, unless they are farmers or smallholders as well, like me!

A former boss of mine was a farmer and embarrassed me many a time. Thankfully, after leaving tax consultancy, I specialised in GP practices where valuations of stock or goodwill don’t  exist and was all too pleased about it.

Jeremy535897

I liked doing accounts for GP practices, although I haven't done any since the late 1970s.

[Deleted User]

Jeremy535897 said:

I liked doing accounts for GP practices, although I haven't done any since the late 1970s.

You wouldn’t recognise them now after new GP contract in 2004. No quarterly payments, GP budget for own employees etc etc - different world!

unholyangel

Deramore12 said:

I'll clarify we basically keep ploughing money back into the business and make no drawings and do not take a wage.

So who will be paying the other £11200 rent (80% of 14k)?