Introduction to this document

Wastage/losses record

HMRC typically uses a mark-up of purchases to selling price to construct an anticipated sales figure. However, this doesn’t generally allow for wastage/write-offs. So what simple records could you keep about “wastage”?

Wasted stock

Product losses can take many forms: discounts and other price reductions made to specific groups of customers or in response to competition; special offers; annual sales; scrappage of stock; wastage arising from spillage, breakage, processing, perishables or inexperience; and pilferage by suppliers (e.g. short measures) or staff.

HMRC may try to argue that your wastage figure is unduly high. However, different businesses in the same sector can have very different levels of wastage. There are many reasons for this, such as misjudging the market and ordering too many perishable goods or, perhaps, a desire to maintain high standards.

Acceptable evidence? Any diary notes kept by you during the year will assist in justifying your reductions for wastage from the maximum figures calculated by HMRC. It can be particularly difficult to justify a figure for wastage in the absence of records. This could be established by keeping details for a sample current period using our Wastage/Losses Record.