the stock / tools that you have purchased are introduced to the new business on its first day of trading as though purchased on that day.
At the end of the period (in this case start of April 2013) the profit or loss is calculated.
Assuming that you have made a loss then that can be utilised in several ways including a carry back claim against prior periods with the loss set against the earliest period first (losses can be claimed for up to three years on a FIFO basis).
Now, there's an important point burried in there in relation to your basis periods (that you already mention March I think that you are on top of this but for others that may read this) in that if your business started in Jan 13 your first three years are :
Jan13 to Apr 13
Jan 13 to Dec 13
Jan 14 to Dec 14
Therefore you need to be aware that if you made a profit in the first three months it will be taxed twice.
HTH,
kind regards,
Shaun.
p.s. as you are an end user rather than a bookkeeper or accountant I just need to emphasise that the above is for outline only and you should seek more detailed professional advice that takes into account all details of your scenario from the financial professional representing your business. (I assume that the question here was simply getting personal clarification before talking with them).
-- Edited by Shamus on Wednesday 23rd of October 2013 11:35:26 AM
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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.
I was employed in 2012 - 2013 until December 2013 and paid higher rate tax through PAYE.
I started my self employment in January 2013 and had a lot of set up costs, stock/tools. Can i claim these expenses as a loss for my sole trader business Jan - March and therefore claim this back against some of my paye tax paid?
I'd just point out that Ed is free (and it's often simplest) to take your accounts to 5th April 2013 and then keep that date as his accounting period. He could choose another accounting period but that way he won't be taxed twice on the same profits.
If 2012/13 was the only year you paid higher rate tax that (same year) would likely be the one you'd look to set the loss against the PAYE income.
agreed, my advice to the micro businesses that I've had as always been to set yearend to March 31st (which is taken as April 5th but gives a nice end of month as a date).
Of course, the other alternative is to suggest 30th of April which will give the best gap between earning and having to find the money to pay the tax bill.
Seems the 31st March / 30th April debate has been going on for years (or more to the point, Cashflow vs eradication of overlap).
So much simpler if people just incorporate and you don't have to worry about this overlap shenanigans although in this instance if the poster had incorporated they would not have been able to take anything back to set against previous personal tax.
All the best,
Shaun.
p.s. quite nice to get a tax question occassionally isn't it to throw in a break from the site seeming at times to be like a Sage helpdesk, lol.
__________________
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.
Yep Shaun and a seasonal trade might give rise to even more losses so simple isn't always best.
You're right, its a shenanigan and on top of that it's not index linked. The latter point being a bug-bear as it is only redeemable upon changing the year end or cessation. As you said, best to get help on this one.
The dates seem a little confusing, but as long as i can claim for the purchase of the tools and stock then they should be able to claim a refund for me.
Can i claim for all of the stock i have bought, even if it wasn't sold before 31st March/5th April?
ed7ajs wrote:Can i claim for all of the stock i have bought, even if it wasn't sold before 31st March/5th April?
?????
Think that you may have missed something somewhere so I'll got through again from the top.
You started you busiess in January.
Everything purchased, assets, stock, etc. is taken into the business as though it was purchased on the first day of trading.
Currently if you told HMRC that you started your business at the start of Jan then your year runs to the end of Dec.
You could however change your yearend to the end of March to tie in with the year end of the 5th of April (End of March dates are taken as the entire tax year).
That would make your first basis period basically the entire 2012/13 tax year although you only worked three months of it.
Overlap periods in this instance would be eliminated.
All of your costs which were processed on day one will come in this first period and probably create a loss which you would set off first against the current period and then on a FIFO basis against the three years prior to the start of your business.
In the 2012/13 period if you paid tax under PAYE and then you have the option to utilise the loss against total income, or carry back the loss to earlier periods on a FIFO basis, or carry the loss forwards.
If you carry the loss back be warned its an all or nothing and the carried back loss takes precedence over personal allowances which could mean that carrying the loss back could end up costing you money so you need to be careful with the reliefs claimed.
Also be aware that the ability to carry back losses is only applicable to the first four years of trading.
Your accountant who will have all of the relevant facts and figures will be able to advise you much better as to the most beneficial use of your losses so that you do not inadvertantly end up costing yourself twenty odd grand in lost personal allowances. (thats worst case scenario and the reality would be nothing like that).
Use the information shared on this site for information only and do not act upon it but rather seek professional counsel peculiar to your circumstances to establish your business properly.
Its always better if new businesses involve an accountant from the get go but you are certainly not alone in only starting to look at the bigger picture when approaching one's first self assessment as a small business owner (Don't know whether you've done self assessments previously but there is certainly one due for 2012/13).
Hope thats a little clearer now,
kind regards,
Shaun.
__________________
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.
