How does a sole trader account for assets they personally owned prior to the start of their business?
For example, I already own a perfectly good computer, but I'm guessing I need to account for it somewhere as an asset of the company. Would it show up as £0?
Small Business - 1 Answers
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Answer 1 :
You need to get the terminology correct to start with. A "company" is a specific legal entity that has to be registered and comply with much statute and regulation. As a sole trader you are running a "business". A sole trader personally owns all the assets of his business. By accounting for assets I assume you mean offsetting their value against tax by claiming capital allowances? If so, if the asset was already owned then you can take its starting value as its value at the time you started using it for business purposes. EG if you bought the computer for £500 2 years ago, its reasonable value now might be £100, so its opening value would be £100 then you claim capital allowances in the normal way. With any assets, if they are partly used for non-business purposes then your capital allowance is reduced by the relevant portion. EG if 50% of your use of the computer is non-business then you can only offset 50% of the normal capital allowance against tax.
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