What are sundry expenses?
There are a number of expenses to account for when running your own business; some of these will be large and easy to identify, but some naturally smaller and harder to classify. Sundry expenses encompass the smaller, irregular expenses that may not be attributable to a specific cost account that you have set up within your accounting systems.
The two main criteria attributed to ‘sundry’, or ‘miscellaneous expenses’, are that firstly the value of the expense is minimal, and secondly the expense type is rare in occurrence. Should an expense be for a greater value, be incurred on a regular basis, or not be easily classed as miscellaneous in nature, the expense must be assigned to a specific cost code within the businesses’ accounts. With that definition being the case, consistent operating expenditure (for example rent/lease payments, or non-cash expenses such as depreciation) cannot be classed as expenses of a sundry nature as they do not fulfil that criteria. Whilst smaller, infrequent, expenditure incurred such as office flowers, or a one-off bank charge for instance, would fit the definition of sundry.
Use the ‘sundry’ category sparingly as frequent use can signal mis-coding. Wherever possible, assign costs to a specific category and reserve ‘sundry’ for unusual or residual items only.
It is worth noting that due to the nature of sundry expenses, they can and will vary dependent on the size of a business as well as which the market that they operate in; one business may class an expense as sundry, whereas another business may have a separate cost code for that particular expense. A small business, for example, that does not typically travel for work purposes may class a parking ticket as a sundry expense as it is an irregular, small expense. Conversely however, a coach business that provides private travel would class any parking charges as an operating expense as naturally this expense would be incurred on a regular basis due to the nature of their business.
Other examples that are often treated as sundry include minor stationery purchases, refreshments for staff meetings, small charitable donations, and incidental courier fees.
How to record your sundry expenses in accounting
Sundry costs will appear in the Statement of Profit & Loss (SoPL) as they are an ‘outflow of economic benefit’ (in simple terms- all expenses are included within the SoPL), and therefore reduce overall business profits. Sundry expenses may also be shown as ‘Miscellaneous expenses’ and if that is the case don’t worry, though your accounting software may display them under a different name, these expenses are the same in nature and treated the same within your accounts.
It is important that you as a business owner are aware and comfortable with allocating the expenses your business incurs to the correct code; though the ‘Sundry/Miscellaneous’ code will exist within your accounting platform, it is ultimately your business’ responsibility to allocate the incurred costs correctly to each cost code, which in turn will then ensure that the business’ profit and loss statement is an accurate reflection of the activity of the business.
Review the sundry ledger regularly. If a particular type of cost starts to appear frequently, create a dedicated account code for it as this improves clarity, audit readiness, and the accuracy of your tax reporting.
What is the benefit of including such a small expense within the accounts?
Although sundry expenses are somewhat of an anomaly within the accounts, they do offer relief in a couple of ways:
As sundry expenses are an allowable expense (for more information on what an allowable expense is, please refer to our ‘What are allowable and disallowable expenses’ blog post), they can reduce the quarterly VAT liability for your business if it is VAT registered, and VAT has been incurred on the sundry expense. If you do reclaim VAT on the sundry expense though, please ensure that this is evidenced by a receipt.
VAT can only be reclaimed if the item is directly linked to taxable business activity and not used for exempt or personal purposes. VAT invoices should also clearly display the supplier’s VAT number.
As the sundry expense has been incurred for business purposes, it is fully allowable against tax (be that corporation tax or personal income tax- dependent on your trading status) and therefore as reduces your profits, will in turn reduce your tax bill by including within the accounts.
While the tax saving on individual items may be small, consistently recording them ensures compliance with HMRC rules and avoids disputes in the event of an enquiry.
In short, not only is it technically correct to include all appropriate business expenditure within the accounts so as to an accurate reflection of business performance, but by including these expenses (no matter how small) within the accounts, it does ultimately save you/your business money and that is important- no matter how little it is, it adds up!
Including all sundry expenses, no matter how minor, also helps build a clear audit trail and demonstrates good record-keeping discipline - something HMRC values when assessing a business’ reliability.
What is sundry income?
On the same principle of expenditure, a business may also receive sundry income (also referred to as ‘Miscellaneous Income’) throughout the year. A simple definition of sundry income would be any source of income obtained through activities outside the normal function of the business. We have listed a few examples below, but remember that what may be able to be classed as sundry income for your business, could be completely different for another:
Late Payment Fees (charged to your customers)
Royalties
Profits on sales of minor assets
Foreign Exchange Gains
Small insurance recoveries (e.g. claim payouts for minor damages)
One-off grants or rebates that are not regular operating income
Despite sundry income not contributing large amounts to overall income (as if it did, it would have it’s own ‘income code’ within the accounts), it is again important to include within the business’ accounts. To ensure the completeness of the accounts themselves, these types of income should be displayed within the statement of Profit and Loss as a gain, therefore increasing overall profits.
If sundry income becomes material in size or occurs regularly, it should no longer be classified as sundry - a dedicated income code should be created. This ensures that the accounts reflect the business performance transparently and remain HMRC-compliant.
In the same vein that expenses of a sundry nature offer reliefs with regards to VAT, sundry income may also have VAT implications for the business (i.e. you may need to be pay over VAT on the income), dependent on your VAT status and the type of income received.
Businesses should also be mindful that some forms of sundry income, such as foreign exchange gains, may have different tax treatments. Always ensure sundry income is reported accurately so that tax liabilities are not understated.
The fundamental point to take away from this post is that sundry expenses are small costs, infrequent in their nature, and difficult to allocate. Despite the fact that sundry transactions are very normally for a negligible amount, both sundry income and expenditure impact the net worth of the business, and therefore it is vital that they are included within your accounts to provide a true and fair reflection of the business.
Accurately recording both sundry income and sundry expenses not only ensures a true and fair view of financial performance, but also demonstrates good governance and discipline in record-keeping - qualities that HMRC and potential investors will look for when reviewing your accounts.
Sundry expenses can prove tricky for all the reasons listed above, and this of course can present a challenge to ensure they are all included. However, we hope now that with this blog post you have a much better understanding of how to account for these transactions, and of course please do get in touch with one of our team if you’d like to discuss any aspect of the above.