Example: Workshop

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For some years now, Anne has restored classic cars as a hobby. She now wants to try to develop this hobby further and start her own income-generating business repairing classic cars. Here, you can see how she manages his expenses and income during the start-up years.

For some years now, Anne has restored classic cars as a hobby, with a large garage and some equipment and tools worth around NOK 100, 000. She has impressed both family and friends with her expertise and has occasionally repaired cars as a favour for friends. She now wants to try to develop this hobby further and start her own income-generating business repairing classic cars.

Year 1 - Decision to set up a workshop

She realises that she now has to purchase more equipment and tools. She knows that he can claim deductions for her costs for up to five start-up years if she succeeds and the repair business does so well that she will be considered self-employed by the tax authorities. She therefore decides that from now on she will retain all her vouchers and complete form RF-1298 Starting a business - summary of vouchers.

She is aware that she cannot claim any deductions from taxable income for the NOK 100, 000 she invested in when she did it as a hobby. She can therefore not enter these costs in the form for the first start-up year.

Date  

Voucher

What

Income 

Cost

 

1

Purchase of hydraulic jack

 

45,000

 

2

Purchase of equipment and tools

 

20,000

 

3

Purchase of materials for workshop

 

50,000

 

Year 2

Some essential improvements need to be made to the garage. These improvements concern drainage and ventilation.

In the late autumn of year 2, Anne opens her workshop and receives payment for some repairs she has carried out. She realises that getting work is not going to be difficult. However, as she recorded a deficit again this year, she doesn’t think she will be considered as being self-employed by the tax authorities. She therefore does not submit an income statement, but hopes she will generate a healthy profit next year.

Date  

Voucher

What

Income 

Cost

 

1

Purchase of ventilation system

 

30,000

 

2

Purchase of fire alarm system

 

20,000

 

3

Completed repairs

 40,000

 

 

4

Miscellaneous supplies

 

20,000

 

5

Electricity, water, gas, refuse collection, etc.

 

15,000

Year 3

In year 3, work floods in for Anne, and she realises that the business is going to generate a substantial profit far quicker than she had originally expected.

She contacts an accountant, who advises her to prepare full accounts for the current year, because it seems likely that she will meet the conditions for being accepted as self-employed. At the end of the year, the business has generated gross income of NOK 350,000 and incurred NOK 150,000 in total costs.

Anne now thinks she meets the conditions for being considered self-employed. She submits an income statement and transfers the net income from the income statement to her tax return. Together with the income statement, she submits form RF-1298 “Starting a business - summary of vouchers”, with an overview of vouchers for each of the two previous start-up years (as shown above).

The tax office will now consider whether Anne meets the conditions for carrying on taxable activity, and if so when the activity actually started and whether there are grounds for amending the tax assessment for previous income years.

If the conditions are met, Anne's tax assessment will be amended for the start-up years that are approved, with the changes to taxable income which the tax office deems relevant following an assessment of the submitted voucher summaries and any dialogue with Anne.

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