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Tax question

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I've recently finished my yoga teacher training and want to do a few more trainings that would fall under the scope of CPD and thus be allowable as expenses. I've earned the square root of fuck all this year so would like these trainings to count as expenses for the next tax year. I've got my eye on one in May - can I book and pay for it now or would I need to wait three weeks for it to count as a 2019-2020 expense?

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Just book it now and take the payment, then move it forward by a few weeks on the books and keep schtum. I defer my payments like this fairly often, my accountant says it's commonplace and legal, although HMRC 'dont like it', whatever that means. I

 

Edit: f you look up 'retained earnings' this explain it. Although this applies to Ltd companies - not sure on sole traders. My understanding of the regulations is that you can do it as long as you aren't jeopardising the company's future.

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Accruals basis - if you're doing the course in may the expense relates to next tax year in any case.

So book it as a prepayment this year (ie money owing back to you, because in reality that's what it is until you do the course) then take the expense into account next year 

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3 minutes ago, AlfredTheLittle said:

Accruals basis - if you're doing the course in may the expense relates to next tax year in any case.

So book it as a prepayment this year (ie money owing back to you, because in reality that's what it is until you do the course) then take the expense into account next year 

Thanks. So that's normal for the traditional accounting method that HMRC are talking about here?

https://www.gov.uk/self-employed-records

How much more of a ballache is that over cash basis?

5 minutes ago, Harley said:

I thought tax was on a cash basis, except for the deferred tax stuff?

You can do can cash basis or traditional as a sold trader under 150k, over that you have to do traditional. 

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Posted (edited)

It doesn't matter. If you make a loss this year you can carry the loss into next year to reduce taxable profits next year.

Simpler still, if you are not trading yet you could just call it 'preliminary expenses' and put it into next year as that would be your first year of trading.

Edited by Panther

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22 minutes ago, Panther said:

It doesn't matter. If you make a loss this year you can carry the loss into next year to reduce taxable profits next year.

Simpler still, if you are not trading yet you could just call it 'preliminary expenses' and put it into next year as that would be your first year of trading.

I think I'll be in profit by the end of the tax year on a cash basis and will definitely be in profit on a traditional accounting basis though.

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46 minutes ago, This Time said:

Thanks. So that's normal for the traditional accounting method that HMRC are talking about here?

https://www.gov.uk/self-employed-records

How much more of a ballache is that over cash basis?

You can do can cash basis or traditional as a sold trader under 150k, over that you have to do traditional. 

My other half is actually doing this sort of thing too. 

My advice is to delay payment and stick with cash accounting. Accruals accounting requires much more detail and rigor and will take up more of your time since you'll be booking some entries twice (once to the balance sheet and then again to release to the P&L), accruing for costs that haven't been invoiced yet and even booking revenue from people who haven't yet paid. Come year end your accounts are more complicated and will require adjustment for the tax computation. 

If you cannot delay payment make the payment this year, you'll make a loss in your yoga business for 2018/19 and can offset said loss next year anyway.

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Posted (edited)
3 hours ago, This Time said:

I've recently finished my yoga teacher training and want to do a few more trainings that would fall under the scope of CPD and thus be allowable as expenses. I've earned the square root of fuck all this year so would like these trainings to count as expenses for the next tax year. I've got my eye on one in May - can I book and pay for it now or would I need to wait three weeks for it to count as a 2019-2020 expense?

There is a regime of pre-trading costs that are, and are not allowed to be offset for trading purposes. 

Training to acquire new skills is NOT to be offset despite it being key to the trading in the first place.

If you have completed no Yoga Teacher Training (YTT) previously then these training costs are not allowed for the tax calc and will be added back when the computation is performed. 

If you go on another training course focusing on the latest Yoga teaching methods this IS allowable since it is improving or keeping existing skills up to date. 

So initial YTT is not allowed for tax but the CPD courses are. 

I maintain though to stick with cash accounting. Keep it simple, spend less time doing accounts and more time enjoying life or doing yoga :)

Yamaste :) 

 

Edited by Adarmo

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20 minutes ago, Adarmo said:

There is a regime of pre-trading costs that are, and are not allowed to be offset for trading purposes. 

Training to acquire new skills is NOT to be offset despite it being key to the trading in the first place.

If you have completed no Yoga Teacher Training (YTT) previously then these training costs are not allowed for the tax calc and will be added back when the computation is performed. 

If you go on another training course focusing on the latest Yoga teaching methods this IS allowable since it is improving or keeping existing skills up to date. 

So initial YTT is not allowed for tax but the CPD courses are. 

I maintain though to stick with cash accounting. Keep it simple, spend less time doing accounts and more time enjoying life or doing yoga :)

Yamaste :) 

 

Thanks, that's really helpful. I've already done a vinyasa YTT. The course I'm looking to do in May is a 50 hour yin yoga training which should count as a CPD since it's still yoga. I also want to do a yoga nidra course and probably a pregnancy training in the next year or so.

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1 minute ago, This Time said:

Thanks, that's really helpful. I've already done a vinyasa YTT. The course I'm looking to do in May is a 50 hour yin yoga training which should count as a CPD since it's still yoga. I also want to do a yoga nidra course and probably a pregnancy training in the next year or so.

Er, don't forget the classes!

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