Donations

Trish

From time to time a client of mine will donate free Sunday lunches for two,usually to a charity. How do I handle this in their accounts as no money actually changes hands?

Hope someone can help, I would be very grateful.

Best wishes Trish

Bowdent

Can you clarify what business your client is in? I'm guessing perhaps a restaurant or pub.

You don't have to actually do any postings as such if you don't want to. If you think about it, the restaurant owner paid for the food which is sat in the accounts under cost of sales. He's given it away, so you don't want to create a further charge to the accounts, else you'll double count it.

If you wanted to illustrate an accurate GP on the face of the accounts, you'd perhaps credit cost of sales with the cost (ie not the retail value) and bring that down to the overheads under a cost of 'treating of customers' or something like that.
T

deanshepherd

I suspect HMRC would rather you credited the retail value (not the cost). You can then separately consider the tax relief available on such a donation.

Bowdent

If the meal was had by (assuming it was a sole trader) by the owner, then it would be the retail value (within sales) that would be adjusted in the accounts with the other side being drawings.

It's the cost element that is adjusted for treating of customers in the way the opening post describes. There is no need to consider any separate tax relief on the donation, as it's recorded in the accounts at cost, which is the correct treatment.

Trish

Donations

Thanks for your replies Bowdent. I think I will debit sales with the retail value and credit donations. Do you think this will work?

Trish

deanshepherd

Bowdent wrote: »

There is no need to consider any separate tax relief on the donation

HMRC may beg to differ.

Bowdent

Well to say I worked for a practice that specialised in the licensed trade for years and have dealt with inspectors on the matter, I'm sure it's fine.

Bowdent

Trish wrote: »

Thanks for your replies Bowdent. I think I will debit sales with the retail value and credit donations. Do you think this will work?

Trish

If you are going to do the retail value, don't forget that you want to credit sales, and debit donations rather than the other way round.

Trish

Donations

Thanks Bowdent, I kicked myself when I realised what I had said, of course it would be credit sales and debit donations.

Thanks again for your patience with my stupidity.

Regards Trish