I have a question.... A builder who is a sole trader and also Vat registered does the job. The job is tilling bathroom. The price he gives to his client includes work and materials (tiles). He purchases the tiles and pays for it. Then he issues an invoice to his customer for the total. Now, is the receipt for the tiles treated as his expense and included in his tax return or not?
1. Builder buys the materials and sells on at a profit eg labour £500, materials cost £100 and he bills them out at £120. So therefore the £100 materials cost is an allowable expense and he issues an invoice for £620 and makes £520 on the job.
2. The customer buys the materials for the builder to use. In this case the builder doesnt have any cost and bills the customer £500 for his labour so makes £500 on this job.
The difference in what he makes between the jobs is off course anything additional he charges on the materials that he buys.
What wouldnt be correct is not to include the cost of £100 in scenario one as he has incurred that cost but has then just recharged it in his invoice.
Thank you Mark. The builder doesn't charge any extra for materials and when he issues the invoice to his client he gives him the breakdown on it. Can I also ask you, he wants to use sage from April 2013. But he has been doing all his accounts by himself in Excell so it is impossible for him to produce the trial balance. What can he do start using Sage? Best wishes Shelly
I would like to ask if a builder who is a sol trader and Vat registered wants to start using sage for his excising business but cannot prepare the trial balance as until now he has been doing all his accounts by himself on Excell what would be the solution for it?
Has he been using an accountant? If so, they should be able to produce some opening balances for you. If he hasn't been using an accountant, who has been producing his accounts?
If there are no accounts you will probably have to start with the simplest of opening balances, such as bank balance and capital. You don't have to start with opening balances, you can start entering transactions straight away. All depends on how he has been recording things on Excell really.
the same question was asked in two threads by the same poster. As such the two have been merged to prevent repetition of responses or future lost linked advice.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thanks for your reply. He was doing all by himself on Excell and his accountant (if she can be called that way) just took the totals provided by my friend and did tax returns, etc. She didnt want to do anything else. He has worked like that for the last 2 years. I must say he is very organised. All purchase invoices are coded and filed. I can say he did a good job but it would be much easier for him to use Sage and he asked me to help him. Regards Shelly
