accounting question

[feemish]

Hello,

Dont laugh, this is probably really simple.

Some of the money I've made i have used to increase my stock holding, which is growing month by month.

My question is this. Is the money i have reinvested into stock part of my profit?

or Is buying stock a business expense?

Do you see what i mean?

Mark

[Duncan Rounding]

I'm no accountant (thankfully!) but as I understand it...

"Is the money i have reinvested into stock part of my profit?"
Gross profit, yes. Net profit, no. You have transferred part of your Gross profit into a stock asset.
Your accountant can advise best but you should only be liable for corporation taxes etc on Net profits.

[los_design]

That is also our understanding. If it is stock to be sold/used in products or services and is on the accounts then it is a profit ADDING FACTOR

For other uses (such as internal software use etc) then it is an allowable expense.

Not a qualified accountant (as you can see by the fact I am working past 4pm ) so you may just want to confirm with a pro for your exact position.

HTH

[Mike Hughes]

Get an accountant.

Purchasing additional stock has no impact on your profit. Stock is an asset, and all you're doing is changing one asset (cash) into another asset (stock).

Mike

[Darren B]

Definately no accountant its past 5 now

OK i was sole trader and got taxed for my stock as personal income, so i am now limited and draw no wages, ithe company pays my wife who is self employed and also director and she sorts her own tax out.

Me i now do not pay any tax as i am already PAYE with someone else so the tax is paid there.

With me so far?

Upto 10k is tax free for limited company then i think 10p in the pound up to 20k, you may need to check these amounts but it is something like that. My accountant charges me more for a set of limited company accounts but i pay less overall.

There are many options to consider but a good accountant will be able to advise you of the best options, and this advice should be free, never pay for it.

cheers
Darren

[Blonde brain]

Get an accountant.

Mike

Couldn't agree more.

As a sole trader if you turn your profit into stock thats up to you, however you look at it it is profit and is taxable. Your total annual profit is also subject to 8% National Insurance, this is on top of the the contibutions you should be making weekly/monthly anyway.

Of course this pictures very different if you are ltd

[Stereo Steve]

Buying stock is not a business expense. However, stock depreciation may be claimed as an expense.

Even if you pile all your profits into stock, as I understand it, its still profit. Get advice though, as mentioned above.

[CymraegKev]

Upto 10k is tax free for limited company then i think 10p in the pound up to 20k

Hi All,

I think the 10k ceiling on Corporation Tax (of that is what you are refering to Darren) has now been abolished (from last years budget). Tax is now payable on every penny of profit on a UK Ltd firm....so I've been told recently! Bit of a horrible one that may catch a few people out.

Kevin

[feemish]

Thanks for all the replies,