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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5145
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I bought postage stamps (a considerable amount - about £2000) in the tax year 2014/2015.

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I bought postage stamps (a considerable amount - about £2000) in the tax year 2014/2015. How do I account for them at year end? I am in the 2nd year of self employed trading and I would ideally like to include the total purchase cost with losses made last year against previous years tax however I haven't used them yet. As I understand it, I can't combine the new cash basis method with puttin losses against tax paid in previous years. On the same basis do I need to value my stock of stationary supplies and packing materials at each year end or can they be taken as a loss making expense in the year they are bought?
Hello and welcome to the site. Thank you for your question.

Under cash basis accounting, you expense items to profit and loss account in the year you make a payment/receive cash from customers.

Under accrual basis, you match income with expenses whether you have made a payment for goods/expenses in the year of accounting or make a payment after the year end.

Why do you wish to opt for cash accounting in light of restrictions on claiming against losses.

Many thanks
Customer: replied 3 years ago.

I don't want to opt for cash accounting. I want to be able to offset the loses made in my first 2 years of trading against income tax paid in previous year from when I was employed.

Thank you for your reply.

Stationery, telephone costs, postage stamps are expenses one would normally write off against income in the year the expenditure was incurred whether paid for or not in the accounting year and also whether the real benefit from this expense is in the year or future period.. these are overheads to be written off in the year.

If I were you, I would not take stock of what was not used in the year and defer it to future periods. I would expense it 100% in the year. If this generates a loss, then make this loss available against other income in the tax year or carry it back.

I hope this is helpful and answers your question.

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Best wishes