Owners equity contributed

E. Fudd

Hi folks,

Started up as a sole trader last year. I contributed a large amount of my own money to get up and running and took paid part of it back to myself as owners equity drawing.
I am still owed some money but I am now into the next tax year so how do I show the repayment to myself in the next tax return I do?

Hope this makes sense?

Thanks.

MBateson

You record it as drawings on the return, the money you put in goes under capital introduced.

Mr. Incognito

What is "owners equity drawings"?

Once you put money into a company there are only two ways to get it out- Distributions or Salary.

Both are taxed. Did you pay tax on these drawings?

Citizenpain

Mr. Incognito wrote: »

What is "owners equity drawings"?

Once you put money into a company there are only two ways to get it out- Distributions or Salary.

Both are taxed. Did you pay tax on these drawings?

OP is a sole trader - I imagine its just an account on his/her accounting package that is called owners Equity

E. Fudd

Citizenpain wrote: »

OP is a sole trader - I imagine its just an account on his/her accounting package that is called owners Equity

Correct. Surely I can't be taxed on taking back money I as such "lent" to the business. Basically what I'm wondering is how I show what's carried over from one tax year to another in my tax return?

Diamond_25

E. Fudd wrote: »

Correct. Surely I can't be taxed on taking back money I as such "lent" to the business. Basically what I'm wondering is how I show what's carried over from one tax year to another in my tax return?

you are taxed on the profits of your business not on the drawings, your drawings do not determine your income tax liability

Mr. Incognito

Okay- you are a sole trader.

Makes more sense now.

You are taxed on the profits you earn each year including "equity" drawings. There is no shelter from tax from income earned.

Legend100

E. Fudd wrote: »

Correct. Surely I can't be taxed on taking back money I as such "lent" to the business. Basically what I'm wondering is how I show what's carried over from one tax year to another in my tax return?

say you put 10k initially into your business from savings

on the form 11 there is a line on page 9 (2013 form) called "capital introduced" the 10k goes in there

then the next line is your drawings amount for the year (which would be the return of capital and any other drawings from profit net of pension contributions and income tax - if any -)

The next line is your closing capital account balance which is

cash intro + profit per accounts - drawings......do you have an accountant preparing a set of accounts for you?

the closing capital balance is your op bal for next year (but it is not required on the next year form)

This has actually nothing to do with paying tax, the tax office use the drawings has a technique to counter the black economy. Eg if someone only draws like 10k in a year from their business and has four mouths to feed.....it "suggests" the black economy is at play

Must be tougher for the Revenue to prove since the recession though with lower incomes being commonplace