Reduce Your Tax Bill By $10,000
I was consulted recently by a fellow business mentor (who knew I would provide free advice) about a large firm of hairdressers whose accountant wasn’t being very helpful about their large tax bill.
Luckily the business mentor is smart and whilst not an accountant, had been in business long enough to ask the right questions. One query that had come up was that of the tax treatment of their stock of hair care products. The accountant involved had always treated ALL the stock of hair care products (both retail products sold to customers and that used in the salon by the stylists) as trading stock. Given that the stock on hand of product used on customers by the stylists cost about $30,000 this had pushed up their tax bill by $10,000.
Now in fact the accountant was wrong, as the product used by the stylists is not treated as trading stock for tax purposes as the product is not sold in its own right but consumed in the day-to-day business activities. Tax law says that if the stock meets a number of conditions and does exceed $58,000 in value it can be expensed in its entirety. Such stock is called Consumable Aids which are goods and materials used up in producing a product or service.
The end result? About $10,000 worth of tax saved and another fantastic example of how providing advice or services for free will bring you business, as I have now been asked to quote for their accountancy and tax services!
This of course is just an example of why getting an accountant who really cares about you and your business is so important. Don’t put up with second best or be taken for granted just because the accountant has acted for you or your family for the last 35 years – you deserve better!
If you need help to reduce your tax bill contact Nick on 0800 ASK NICK or email firstname.lastname@example.org.
* Just in case you want to know, the detailed conditions are:
- The goods are used in producing goods or services from which an assessable income is derived
- The goods are wholly consumed or become unusable or worthless after being used once, or are of limited repetitive use or have a very short life
- The goods are not component parts of a finished product or goods acquired for further processing