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Retail Shop - Display Items should be capitalised?

PinnacleBKPinnacleBK West YorkshireRegistered, MAAT, AAT Licensed Accountant Posts: 2
Hi All
I have a new client who has set up a retail shop. I'm preparing her first tax return and I'm just wondering about display items.
She's spent a decent amount (over £1000) on display items, either for showing her wares or window dressing. All the items individually are quite small and inexpensive but proportionately a lot in total.
This isn't something I've previously come across so it's new to me but I was thinking - as most of the items will have a useful life over two or three years, they could be classed as capital, pooled and capital allowances claimed. However, as I said, the individual items are small and inexpensive and not worth creating a register over. Also would be unlikely to recover any value if the venture fails and my client sells everything off.
Does anyone have any thoughts / advice / experience I can draw on?
Obviously the alternative is just to expense them, I suspect she's going to record a loss this year anyway so any capital allowances would be restricted, but it's not really a true reflection analysis then.
Thanks in advance
PB

Comments

  • CSan89CSan89 MAAT Posts: 207
    My opinion would be to expense it as it would be difficult to keep track of and justify as an asset.

    Not knowing the kind of items used makes it tricky to decide for definite but I would probably pick out big items
    (for example manikins (if material)) and expense everything else as advertising or something similar.
    AAT Level 2&3 - 2016
    AAT Level 4 - 2017
    Personal Tax, Business Tax and External Auditing

    ACA/CTA -
    Certificate Level - Jan 2019
    MarieNoelle
  • PinnacleBKPinnacleBK West YorkshireRegistered, MAAT, AAT Licensed Accountant Posts: 2
    Thank you, I think by the time I'd finished going over it I'd decided the same thing. It's not going to be easy to work out which items will be re-used and which are short-term. Most items purchased are under £50.00 so low for capital anyway. She'll just have a hefty amount of expenses this year but I think that's to be expected when setting up a new shop.
  • FACFAC Registered Posts: 17
    It is the matter of capitalising policy of the business. Smaller businesses might capitalise any thing over £100 and bigger businesses over £1000. Whichever policy you select be consistent. And use that policy at all time.

    In this situation the best is to expense the the items as they are small in value.
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