Share this content
1
545

Tax Position Around Stock

Can I offset the cost of making speculative items for an Local Arts Trail, against my tax liability?

Can anyone help me with a query? I'm a Sole Trader in a relatively new cabinet making business. Each year I need to produce speculative pieces (as opposed to commissioned pieces) for a Local Arts Trail. These take a considerable amount of time to make, and it seems to me could therefore be argued to be a legitimate expense. Is this the case? i.e. can I claim the time taken to make these pieces (at my usual hourly rate) as a legitimate business expense? Should HMRC wish to query this, I can demonstrate I still have these pieces in stock, and in most events can even provide photos of work in progress to back up my claim. Any advice would be greatly appreciated, as I'm not the sharpest knife in the box when it comes to tax issues. 

Replies

Please login or register to join the discussion.

avatar
14th Dec 2017 20:14

You can’t charge your own time as an expense so no tax relief available.

Thanks (1)
avatar
By jcace
14th Dec 2017 20:18

You're a sole trader, so for tax purposes, the only costs you are likely to have incurred will be on materials. These might be deductible if you can show that these pieces are made for the purposes of your trade.
Your hourly rate is not a business expense (as a sole trader)... you are taxed on the profit that your business makes (and it is probably from that profit that you pay yourself).
Hope that helps.

Thanks (1)
avatar
to jcace
14th Dec 2017 21:24

jcace wrote:

You're a sole trader, so for tax purposes, the only costs you are likely to have incurred will be on materials. These might be deductible if you can show that these pieces are made for the purposes of your trade.

He says " I can demonstrate I still have these pieces in stock" so presumably he gets tax relief (on, as noted, expenditure not own time) as and when a sale is made.

Thanks (1)
By Ruddles
14th Dec 2017 21:30

"I'm not the sharpest knife in the box when it comes to tax issues."

I'm not the sharpest knife in the box when it comes to cabinet-making issues - which is why I would be happy to pay someone with the appropriate expertise to carry out the work for me. Why do you think that the reverse should not apply?

Thanks (0)
avatar
to Ruddles
18th Dec 2017 11:47

Hi Ruddles,

Thanks for your response. Your point is fair and well made. As it happens, I do pay an Accountant to look after my tax affairs (because of my indicated lack of knowledge in this area). However, they are presently away, and I was just after a small piece of interim advice, as I have been rushing to get my books in before Christmas.

My assumption was that a forum such as accountingweb, was the place to get such advice? Otherwise, I struggle to see why the 'Any Answers' section of this website exists?

In the wood business, many of us regularly share advice on relevant forums to help others overcome manufacturing problems, we all encounter from time to time. Every day is a school day, after all. And I greatly appreciate those on this forum who have come back with positive feedback. Thank you all. It just seems a shame you don't feel the same way about that in your business....

Thanks (1)
to Jez Partridge
18th Dec 2017 11:55

Jez Partridge wrote:

In the wood business, many of us regularly share advice on relevant forums to help others overcome manufacturing problems, we all encounter from time to time. Every day is a school day, after all. And I greatly appreciate those on this forum who have come back with positive feedback. Thank you all. It just seems a shame you don't feel the same way about that in your business....

People in the wood business are your colleagues.

People in the accountancy business are my colleagues.

People in the wood business are not colleagues of people in the accountancy business and there's the difference. I don't know much about cabinet making and you don't know much about accountancy. Each to his own.

Thanks (0)
avatar
to lionofludesch
18th Dec 2017 13:47

OK, fair enough...

At the end of the day, I'm just a bloke after a couple of sentences of (in this case) free advice.

Sorry to have bothered you guys. Should you need any information relating to wood, I'll be more than happy to provide it for you (without charge).

Have a good Christmas.

Thanks (0)
By Ruddles
to Jez Partridge
18th Dec 2017 12:23

Jez Partridge wrote:

In the wood business, many of us regularly share advice on relevant forums to help others overcome manufacturing problems, we all encounter from time to time.

Exactly - in the accountancy business, many of us regularly share advice on relevant forums to help others overcome technical problems, we all encounter from time to time.

Jez Partridge wrote:

I struggle to see why the 'Any Answers' section of this website exists

"AccountingWEB.co.uk is the largest independent online community for accounting and finance professionals in the UK"

Thanks (0)
By tom123
15th Dec 2017 08:20

The items form part of your closing stock and are therefore not an expense of the period.

If there is no chance of them selling, the cost can be written off in a subsequent period.

Thanks (1)
By Ruddles
to tom123
15th Dec 2017 09:14

In the context of the question, though - what is the "cost"?

Thanks (0)
to Ruddles
15th Dec 2017 09:32

I agree - the OP asks about his time. Claiming for the materials is fine - but not his time.

What's not clear is - are these pieces saleable or are they just display or showcase pieces ?

Thanks (0)
avatar
to lionofludesch
15th Dec 2017 10:09

It's not the first time we've had that question. Punters seem to understand that time is money. They don't ask themselves the question out loud before posting though.

Let's try (I'm reading aloud as I write, honest): if I work for you for £40 an hour and do five hours work, you owe me £200. If I work for myself for five hours can I get a deduction for the £200 I pay myself... wait... pay myself... have I just received £200 from myself?... ooh, erm...

Thanks (0)
avatar
18th Dec 2017 11:51

Many thanks to all contributors for your helpful advice. I appreciate it. Best regards,

Jez P

Thanks (2)
Share this content