[Tosh]

Macmac asked:

My chartered accountant says a "bought round" is NOT tax deductable as you are only buying good will. Then I read others on here who have claimed the full amount of their "good will". So, who is right?

His accountant was wrong; here's the definitave answer taken from a tax book with regards to sole traders selling on their business:

From the book (Understanding Tax for Small Businesses: ISBN 978-0-340-92741-0)

you can however sell all the individual business assets such as land, buildings, equipment, goodwill (such as your client list) and stock.

Here's the reference in black and white:



Macmac, your chartered accountant was wrong, and this fellow window cleaner was right; I usually am as Ronnie Patton knows!

 

[Moderator David@stives]

Tosh you can buy good will and sell good will.

It is only deductable when you sell.

Ie if i buy a round for £10k I cannot claim that against tax until i sell, say i sell three years down the line at a loss of £5k i can claim £5k aginst my tax, however if i sold for £20k i would only pay tax on £10k

[AuRavelling79]

Tosh - that book is about selling the round and it says you could be liable for capital gains tax (as a s/e person) - if it makes sufficient gain.

But buying it? Does that count against income tax? I always thought so but from your quoted book it seems to be a personal asset upon which you can make or lose money.

So does that mean if I buy eg a £1000 worth of work off of you then I don't claim it as a business expense but then when I sell it on in 5 years for eg £2000 then I have £1K which would be a capital gain liability if it is part of gains over the threshold for that particular year?

On the rare occasions I've bought work (goodwill ?) I've put it against my expenses, When I've sold stuff I've counted it as profit. Maybe I shouldn't have done either ...

[Tosh]

Guys, it all seemed really simple to me till you started posting; and Dave, I think you're totally incorrect.

Look, it works like this:

You buy some work worth £100; then you class that as an expense; just as you would for fuel.

And in the same vein, you sell some work worth £100 then that's added to your turnover which you're taxed on.

Whether the work you first bought and then sold is the same or different work, that's irrelivant; it's classed as two totally different transactions.

Does that make sense?

----------------------------------------------------------------------------

Here's an example.

I buy some work from Squeaky for £100.  I get a receipt from Squeaks and put that down as an expense for 08/09 tax year.

Then one year  later I sell the same work, plus some other stuff, for £500, then that £500 is added to my turnover for 09/10 and taxed as such.

Does that help?

[AuRavelling79]

No - cuz that book talks about capital gains tax, not income tax ....

Anyway Squeaky hasn't got any work worth a £100, so it's academic.

[matt]

my accountant said i couldnt claim either

[Tosh]

Right, erm, er.... I'll be back ... I've got some reading to do I think!

 

[windowwashers]

my accountant said i couldnt claim either

Same here, and if they was wrong I will be well annoyed

[Tosh]

AAAAaaahhhrrrr, this isn't fair!  You're all ganging up on me and I've never bought a round in my life!

I know how Ronnie feels now; this is just so unfair!

I was only trying to help, and I don't believe I'm wrong either; you lot all are; and all of your accountants too!  I'm a Geordie, we're never wrong; well not usually anyway!  I've only ever been wrong once in my life and that was when I said it would rain and it didn't.

I remember that moment precisely.  It was a Tuesday!

So help me, Allah!

[Tosh]

!  I've only ever been wrong once in my life and that was when I said it would rain and it didn't.

what about when you got married 

Okay, twice then!

[mci services]

tosh my business advisor said it was fine from the business gateway, but he could be wrong i dont have an accountant so god knows, hope it is as i have £300 to put through even though the work was terrrible and i dumped it(leason learned) i still bought it and it should be an expense, i hope

[Moderator David@stives]

I think There is a way of putting goodwill through your accounts but only a tiny percentage each year, i forget the term, but you can put the servicable life of the goodwill, ie 20 years , then offset 5 % of it or something like that.

I think the term is amortization or similar. I think it works if you put the good will you already own into a company if you go limited, I think the goodwill is classed an intangible asset, I will have to research that bit.


All i can say is ask the hm revenue or an accountant.

[ronnie paton]

tosh ee me out of this im sure your big nose and big gob can sort things out on there own

[Steve B]

Tosh you could phone the Tax office and ask them directly this will clear it up once and for all.

[Moderator David@stives]

Tosh

Please stop having a dig at Ron it is uncalled for.

[Rob.Hall]

This is the law. I confirmed it with the tax office.

If  you buy a round it is not tax deductable.

The reason. It is a capital asset.

Just the same as buying a franchise or building....It has a value when sold.

If you did not sell the round when you give up then you can argue to differ.

I am building a workshop but it is classed as a capital asset so I cannot claim it as tax deductable.

[Sir Squeaky]

No - cuz that book talks about capital gains tax, not income tax ....

Anyway Squeaky hasn't got any work worth a £100, so it's academic.

I suppose you've got a better round than me then Malc? :
You know that for a fact do you?

[dai]

If it's classed as a capital asset, then it must surely fall into the same category as buying a van.
You claim a percentage, say 25% every year over four years.

[Ian_Giles]

How can it be called a capital asset when ultimately it is only good will, just a list of customers, I would certainly argue that the "round" is no more than a business expense.
That would be very different if as well as a list of customers you were also buying solid assets, van, equipment, poles, pumps, ladders, filtration systems and so on.

The "round" itself is not a fixed or tangible asset.

I would further imagine that it would depend on the individual tax inspector that looks at your accounts in depth, some might agree with the interpretation I have just outlined, others might lean towards the one that Dave and others have outlined.
That's the problem with tax...it  doesn't have to be complicated....but it is! 

Ian

[macmac]

Still waiting tosh!

Respect for the the research though.

I'm thinking of doing my tax return online this time. I've always used a large, respected chartered accountant company to date but last year was the first full year where ALL they had to do was fill in my return online, I sort all my stuff out neatly & present them with it. i.e. I didn't use them for advise or any other matters relating to tax. My bill was nearly 400 quid, personaly I think this is steep & this year I'm going to question this & offer them by books for 200 quid,(cheek I know) If they decline then I may just do it myself. I have gained enough knowlage from them up to now I think to do it myself.

BUT, everybody seems to have differing oppinions on tax issues & getting to the absolute truth can be a time consuming pain. I once phoned the tax office regarding an issue & I knew more than the person on the other end :

Is the 400 quid worth the time saving & satisfaction/ease of mind that all is in order?

Tony