The cost of the item will be in purchases, but as you gave it away you wont have any income and you wont have it in closing stock so when you do the period end accounts the cost will be written off.
eg if you have 2 items that cost £100 and you gave one away then at the period end the sales would be £0, purchase would be £200 and closing stock would be £100 so therefore cost of sales would be £100 (£200 - £100) and you would have a loss of £100 (£0 - £100).
The cost of the item will be in purchases, but as you gave it away you wont have any income and you wont have it in closing stock so when you do the period end accounts the cost will be written off.
eg if you have 2 items that cost £100 and you gave one away then at the period end the sales would be £0, purchase would be £200 and closing stock would be £100 so therefore cost of sales would be £100 (£200 - £100) and you would have a loss of £100 (£0 - £100).
Mark,
As the gift has a sales value of more than £50, is there not potentially VAT due on the sales value of the gift too?
The cost of the item will be in purchases, but as you gave it away you wont have any income and you wont have it in closing stock so when you do the period end accounts the cost will be written off.
eg if you have 2 items that cost £100 and you gave one away then at the period end the sales would be £0, purchase would be £200 and closing stock would be £100 so therefore cost of sales would be £100 (£200 - £100) and you would have a loss of £100 (£0 - £100).
Mark,
As the gift has a sales value of more than £50, is there not potentially VAT due on the sales value of the gift too?
Dont know what you mean.
How can you have VAT due if you didnt get anything for it?
What he means is that with business gifts, if the value of gifts to one person within a twelve month period exceeds £50, those gifts have to be accounted for as though they were sold - i.e. 20% of the sales value has to be added to your outputs VAT, as though you sold them for that price + VAT.
-- Edited by VinceH on Thursday 2nd of April 2015 11:34:20 PM
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
The way I always think of it is that Vat is a game of give and take until it reaches the end consumer where the charge sticks - no recovery from the VAT man.
A gift to the end consumer would mean that the VAT man got nothing if there weren't rules to ensure that the VAT stuck where the money trail ended. Hence the requirement to charge VAT on the sales value of business gifts (or, alternatively, no recovery of input VAT on the items bought for gifting), subject to the £50 in 12 months de-minimis rule.
