Simplified accounts for small sole trades and partnerships
The accounts for most small sole traders and partnerships are already reasonably straightforward but from 2013/2014 HMRC have introduced a set of concessions that may simplify matters even further in some cases.
The scheme is open to sole trades and partnerships with turnover up to £81,000 or, where the trader is claiming Universal Credit, up to £162,000. It may be used by VAT-registered entities although this would be an uncommon situation.
The main features are:
* The 'cash basis' means that income and expenditure are accounted for when they are received and paid. So for example if you have unpaid income at the year-end, it won't be accounted for until the following year.
* Three headings of expenditure can be accounted for in a simple, standardised way: motor costs, use of home as an office and loan interest.
The method is in fact what the vast majority of such small businesses already use: 45p per mile for the first 10,000 miles in the year; 25p per mile thereafter.
Use of Home as an Office
Expenditure per calendar month may be claimed based on the number of hours worked from home as follows:
25 - 50 hours; £10
51 - 100 hours; £18
101+ hours; £26
Up to £500 per year may be claimed for loans even where it may not have been established that the loan is exclusively for the business. This does not prevent interest on, for example, HP on a business asset purchased from being claimed.
In reality there may be no discernible difference for the vast majority of eligible businesses but it should be noted that any losses incurred when using this scheme cannot be offset against other income in the year; they must be carried forward for use against future profits.