As a landlord letting a furnished properrty I can choose to either claim back furniture as I buy it, or claim 10% Wear and Tear Allowance. In my case the 10% Wear and Tear Allowance works out best.
But should I show the furniture I purchase in sage, but I obviously can't have it show in my accounts as this would mean I am claiming both which it not allowed. Not sure what to do, any advise would be appreciated?
The furniture purchases should be shown in your accounts, but the wear and tear allowance shouldn't be. When you do your tax return, deduct the value of the purchases from your allowable expenses and show the 10% wear and tear allowance in the appropriate box (sorry, can't remember the box number at the moment)
What would be the easiest way to track furniture purchases in Sage. I have a few unfurnished lets, so must not get mixed up with these.
I'm wondering wether to setup a new NC for this Furniture, or should I maybe allocate to a seperate department, or maybe something I've not thought of?
Just looking for an easy way at year end to view furniture I should not include.
Just been thinking about this some more, I agree the solourtion will work, but my accounts will not reflect my tax return, and as years go on they will drift further apart. Would I not be better to calculate the 10% Wear & Tear, and then do a journal entry and post the correction either way. This way my accounts will always reflect what is on my tax return; and if I get inspected I can easily show this?
Accounts rarely do match the tax return and there is no real reason why they should. if you did follow the tax rules the accounts may look rather odd.
For example if you bought a piece of machinery and wrote it off in the accounts in the first year because you get AIA on it, you would have a large charge in one year and no depreciation charge in the following.
If you get inspected you just need to show the adjustments you made to the profit in the accounts to come to the taxable profits. The inspector will be looking for this so it will not raise any flags.
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Nick
Nick Craggs FMAAT ACA AAT Distance Learning Manager
Dont worry about this. It is to be expected that you adjust the profit from the accounts to come to the taxable profits.
As long as you keep your adjustments to profit you have everything you need should you be inspected. A Tax inspector will be expecting to see adjustments made to profit as it is very rare that there is nothing in the accounts that needs adding back or that there are not other allowances that are claimable.
Hope this helps
Nick
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Nick
Nick Craggs FMAAT ACA AAT Distance Learning Manager
Okay gonna track purchases in Sage, but where should I put it. I could put it in Fixed Assets - Furniture and Fixtures 0040, but I assume I should only do this for expensive furniture, say over £500 ? Should I then just put cheaper furniture in Purchases, maybe new NC 5010 ?
Interesting that this has come up. I have a client in a similar position.
If it's damaged furniture, say, or a worn-out cooker that you're replacing, it's still a fixed asset. Presumably the originals will be on your asset register and being depreciated each year?
It's your decision, though, on what value of item you're going to depreciate each year, and what you'd consider to be too small to be bothered with (instead being treated as a small purchase/disposable overhead).
If you're using Sage, you might find it has an asset register/depreciation function, so even small fixed assets can be depreciated without much effort.
Whatever, I would personally keep the 5000 range for purchases of materials etc which go towards goods to be made and sold on, which is not quite the same as your problem.
By the way, I believe the 10% allowance is being withdrawn in April this year.
