[scud]

  Why not when buying a round is pay cash, they keep quiet, you keep quiet and earn your money back before adding it into your declared earnings.

  as a disclaimer - I have never bought anything in my life, including window cleaning work.

[Tosh]

Right, just a quick one here, but the page I posted up related to 'selling your business'; not buying a round; so it was the wrong reference to use.

And as someone said earlier, and after a bit more reading, I suspect buying a round could be counted as a Capital Asset, though this normally - I agree - is something that's a 'bit of kit', rather than something intangible like goodwill.

But 'goodwill' is definately recognised by the tax man, since when it comes to  selling your business, he'd be after the captial gains you've made on it.

If it is a Capital Asset; which I strongly suspect it is; then you'd be able to deduct a certain amount per year from your profit, thereby reducing your tax liabilty; till the amount you spent was used up as an expense.

But what I don't believe is that you can spend, for example, £3000 to purchase a round to start window cleaning, and that has no effect on the income tax you pay at the end of the year, and that you can only 'save' when you close your business down; say 20 years later; that just doesn't make any sense to me; and normally there's a method behind the madness of rules and regulations.

I'll do a bit more reading and come back with what I think is a definitive answer.

PS.

Sorry, Ronnie, Squeaky has stopped biting at my derogatory posts about him; so I've chosen you to fill his boots.  It means I like you really!  Honest!

PPS.  I still think I'm right on this matter!  

[Tosh]

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.

Ian

Define a Capital Asset!  I bet you can't.  Why?  because:

From my tax book:

There are no hard and fast rules that define plant and machinery.  Machinery is usually fairly easy to identify but 'plant' is not and many cases end up in dispute ultimately to be considered by the courts.  To be eligible for capital allowances the asset must be necesssary to the functioning of your business... [etc]

So given that above paragraph, I reckon it could be strongly argued that buying a customer list (goodwill) is 'plant', because it's necessary to the functioning of your business.

Therefore should be treated as a Capital Allowance!

[Tosh]

Oh, and I suspect that Capital Allowances differ from expenses and overheads (which are both usually tax dedudctable) because Capital Allowances items can be high-cost; a lot more than your annual fuel or phone bill.

For example, the tax man doesn't want you buying a luxury car for your business to get out of paying tax for that year does he?

So he calls it a Capital Asset and says the most you can claim against your income tax is £3K maximum per year.

Can you see the method?  It's still a bit foggy for me, but I'll get there.

[Sir Squeaky]

Sorry, Ronnie, Squeaky has stopped biting at my derogatory posts about him; so I've chosen you to fill his boots.  It means I like you really!  Honest!

So you've just inadvertantly said you like me Tosh.

Ah, so sweet!

[Tosh]

Squeaks, you're alright for a ginger balding bloke!

[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.

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

No Rog - Your round is way better than mine! My post was meant to be a little light humour - sorry if I caused offense. 

[Tosh]

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
Tony

Tony,

Your accountant company earned £400 for less than - at most - half-an-hours work!

That's not a bad business to be in, is it?

[Tosh]

Oh, and having a Chartered Accountant is no guarantee that you'll avoid a tax investigation.

My Bible (tax book) explains fully how and why some businesses get tax investigated; how it all works; etc.

[AuRavelling79]

Oh, and having a Chartered Accountant is no guarantee that you'll avoid a tax investigation.

My Bible (tax book) explains fully how and why some businesses get tax investigated; how it all works; etc.

Why do some get investigated Tosh?

[Tosh]

Oh, and having a Chartered Accountant is no guarantee that you'll avoid a tax investigation.

My Bible (tax book) explains fully how and why some businesses get tax investigated; how it all works; etc.

Why do some get investigated Tosh?

ISBN 978-0340-92741-0, Understanding Tax for Small Businesses, page 38 explains it all in depth.

It says HMRC will never tell you that they are satisfied with our tax return and because it is up to you to self-assess your tax they have a right to check the form in detail.  This process is called an enquirey, investigation or audit.  

It then goes on to list all the occassions when they will investigate you, and one of the scary things is that they have upto the end of October each year, even though you may have submitted your return in April/May time; and you have had your bill.  

If you're like Squeaky, you could submit your return electronically on the 31st January; and then the Tax Nazis still have till the next October to investigate; even if you've had your statement.

Scary isn't it!

[dai]

I read recently that apart from receiving information that there is some fiddling going on, the investigations are chosen at random by computer.

[Tosh]

I read recently that apart from receiving information that there is some fiddling going on, the investigations are chosen at random by computer.

Ah Dai, I was trying to be 'coy' and you gave the game away; you're pretty much right.

Wait a sec, I'm off for a smoke, and  when I return I'll type out all the reasons my book gives for a tax investigation; and add some anecdotal information too.

Give me a sec!

[macmac]

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
Tony

Tony,

Your accountant company earned £400 for less than - at most - half-an-hours work!

That's not a bad business to be in, is it?

Yeah, I'm starting to realize that now! What about this-

TOSH & MACMAC- "let us cook your books"

We could be partners

[Tosh]

what about Mac an Tosh you could do it on rainy days 

Hey, I used to have an 'oppo' called Mac (a good friend) and that's what they called us, Mackintosh!

[macmac]

MacinTosh- "when there's rain there's a claim, give us your good will"

[AuRavelling79]

Tax men (or their computers) flag up significant changes in income/expenditure.

If they come round your gaff and your saying you earned £15K and there's an Aston on the drive and your mrs has spent more on implants than Michael Jackson then you've got biiigg probs!

[Tosh]

Tax men (or their computers) flag up significant changes in income/expenditure.

If they come round your gaff and your saying you earned £15K and there's an Aston on the drive and your mrs has spent more on implants than Michael Jackson then you've got biiigg probs!

Malc, that was one of the things I was going to point out.  But apparantly, so I've been told, in the 'olden days' when tax returns were checked by local inspectors they could tell if a return was overly fraudulent, because the inspectors had local knowledge.

So if someone was claiming just to turnover a pittance, yet lived in a big posh house; they knew something could be dodgy. 

But since it's all 'centralised'; now they don't!

But here's what my book says (when I get round to scanning it):

[Tosh]

Tax investigation reasons!

[mikethechamois]

those whose acountants told them not to try and claim for goodwill were right

goodwill is intangible...................how do you put a monetery figure on it

if a round has been worked well for years its worth more as your more likely to keep the goodwill of the customers

if its a recent round and most of the customers dont even know who their wc is

you will have to work hard to build customer loyalty

you will pay market value for the round , the more desirable, the more interest, the more you will have to pay

be very wary of capital expense

if its capital losses .................vehicle, tools, equipment etc

not a problem as its all going your way

if its something that could appreciate in value it could work against you

so you buy a round for 3k  and claim an annual right down against depreciation

5 yrs later sell for 6k...................the taxman will claim back all the writedown as its not depreciating its appreciating and then claim 40%  of the profit as unearned income

so the accountants are right...............its not worth it

if your a sole trader turning over under 45k then you only need to make a statement to the taxman.......................income less allowances

you can put the 3k through as a business expense the same as stationary, marketing etc, you wont get 3k off your tax  liability but you will get a lump of it back and they will tax you on  the profits made from this purchase

when you come to sell they will consider you have prepaid the tax on the 3k and leave it alone