Tax question.

[Rorschach]

Oh I should add, it doesn't matter if materials cost is not claimed as an expense in the same year as an item is sold. HMRC will understand that craftsmen may buy bulk material and use it for years.

As Dibs-h said, stop doing what you are doing, if you are audited you may find yourself in a heap of trouble as they may well cancel large parts of your expense claims from past years.

I keep mine simple, I have a printed receipt for every expense I claim, if HMRC want to check they are welcome to. The fact that I may not have used all those materials yet is none of their concern.

 

[Sgian Dubh]

That is an odd way of doing things. If HMRC checked I am not sure you would fare very well there.

Maybe it is odd. I don't know. The reason I did things that way came down to my income sources. It was only three years ago that a significant source of my income came through self employment earnings. Prior to that probably 95% of my income came through paid employment - salary less NI contributions, PAYE, pension contributions, with occasional earnings outside that source. Sometimes I'd build stuff and of course incur the material costs which I'd keep a record of, but then if I decided not to sell what I'd built, and to keep it or give it away, so no sale, no legitimate expense as far as I could see to declare to HMRC.

As to the other long ongoing expenses I mentioned, going back as far as 2005, they related to a research and writing project I undertook whilst also working as an employee and for which I wasn't sure there'd ever be sellable end product. It turns out there is an end product, a book. So, again, unconventional as it may be, I'll set those expenses against any income from the book in the next tax year.

However, on the whole, now that my circumstances have changed and most of my income is generated through self employment, and I keep my accounts on a cash basis, if I spent, say £1,000 today (tax year 17-18) on material for a project, and didn't get paid for that item until tax year 18-19, then I'd do the conventional thing when completing my tax return, i.e., expense declared in 17-18, and income declared in 18-19. Slainte.

 

[skipdiver]

Interesting topic. Thanks for all the input folks.