What is the correct accounting treatment for stock gifted to charity ?
Should the transaction be accounted for as a sale (turnover) or is it correct to deduct the costs of the goods from cost of sales ?
Replies (4)
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It is not a sale
Goods purchased (or manufactured) have, after the fact, proved to have been purchased (or manufactured) otherwise than for sale.
The precise bookkeeping entries will depend on what the previous bookkeeping entries were, but should reflect the fact that some of the costs that have been incurred have been incurred for the purposes of making a donation of goods to charity.
There! Sounds so obvious when you say it out loud.
And yes. There probablly is tax relief, but the facts you have offered are rather sparse.
Perhaps the multi office firm was correct
If you check hmrc guidance then you will be aware of the VAT implications. And the accounting treatment required, and the possibility of improving the tax and vat outcome for the client business
For modest amounts one may not be unduly concerned.
But the hmrc vat guidance does show you the range of possible outcomes, only we in the UK seem capable of producing endless variations on a theme.
A Knowledgeable
vat compliance officer could catch you out.
Ps
If the amounts involved are significant would you amend prior year tax returns, assuming that you follow your new treatment.
Also is the client going to question your new treatment , assuming he is alert to the transaction accounting .
He may have incurred fees to ascertain the previous treatment. To ensure that he was tax and vat compliant