Stopping Phoenix Trading with stock

dingdongavon

I have been a Phoenix Trader for a few years but decided not to renew my membership this year as I wasn't doing much in the way of sales etc.

I have got stock left that I had bought in for selling at fetes etc, so what do I put on my tax return regarding this and do I put the end date of business as the date I should have renewed?

Thanks in advance.

Nicola_Ed

Hi

You need to include the value of the stock as a sale ( I am assuming you are not VAT registered). Below is the HMRC guidance which may or may not make sense depending if you are used to reading this sort of thing.... ( highlighted in red)

A business ceases when it ceases - normally when you stop looking for customers/stop advertising/close the website etc.
BIM33470 - Stock: valuation on discontinuance of business: general principles

ICTA88/S100 and ICTA88/S101

Sections 100 and 101 apply whenever a trade, profession or vocation is discontinued. They fix the closing value of stock to be used in computing the profits of the ceasing business and, in some circumstances, the cost of the stock for the business acquiring it.

Section 100 applies to trading stock and Section 101 applies to the work in progress of a profession or vocation. The same general principle is applied by both sections.

If the stock or work in progress is transferred to another entity who will bring the value of that stock or work in progress into the computation of their Case I or II profits there are specific rules, explained at BIM33480 onwards for stock and BIM33540 for professional work in progress.

In all other circumstances the value of the stock or work in progress is what would be given in an arm’s length sale (ICTA88/S100 (1)(b) and ICTA88/S101 (1)(b)), see BIM33525. There is an exception where the trade is discontinued because the trader dies, ICTA88/S102 (2),BIM33520.
What counts as discontinued

• the actual cessation of a trade, profession or vocation,
• a change in the persons carrying on a business which is deemed to be a discontinuance under ICTA88/S113, see BIM72225, (this is not simply restricted to changes in partnerships membership),
• where a company ceases to carry on a trade, or to be within the charge to corporation tax in respect of a trade, this is treated as a discontinuance of the trade, whether or not the trade is in fact discontinued, ICTA88/S337

jimmo

http://www.hmrc.gov.uk/manuals/bimmanual/BIM33525.htm

Your closing stock valuation needs to be what you could reasonably expect to get if you sold the whole of your closing stock in one sale.

I imagine your only chance of selling your stock would be to another car-booter and you wouldn‘t get anywhere near what it cost you..

lottiemad

Hi where are you? I am thinking of starting up with Phoenix and maybe interested in your stock. I know I sound cheeky

dingdongavon

lottiemad have messaged you. Thanks for advice Nicola Ed and Jimmo (belated thanks as notification didn't work until now and I forgot to check thread after first couple of days).

Do you think a figure of 50% less than retail cost for everything is too low? Like you say Jimmo I won't get anywhere near what I paid but I don't want to look as if I have given it away!

jimmo

dingdongavon wrote: »

Do you think a figure of 50% less than retail cost for everything is too low? Like you say Jimmo I won't get anywhere near what I paid but I don't want to look as if I have given it away!

My knowledge of Phoenix is limited to a very quick Google before answering your original post so please excuse my ignorance on that.

First of all if you can do a deal with lottiemad you will have a definite figure.

If you can’t then you have to consider whether your closing stock is a load of useless, worthless old junk that you will, one day, chuck in the bin.

If that were the case you would be entirely justified in valuing your closing stock as nil.

If the stock is something that will actually be useful to you and you will gradually make use of maybe it still has a value.

If I were in your shoes my gut feeling is that I would value my closing stock at no more than 10% of what it had cost me to buy, not the retail price.

However, being a former taxman, I would be very confident of arguing my case with HMRC if the need arose.

In practice, on this issue alone, HMRC will not come sniffing if your closing stock cost you tens or hundreds of pounds. They might if it cost you thousands but I can’t believe it did.

dingdongavon

Thanks Jimmo that's really helpful. I appreciate it