How to calculate reseller profits for self-assessment

vestibule

Hello!

I am having a headache with my tax accounting.

Last year I started a small online business reselling vintage jewellery, but I am incredibly confused about how I am supposed to calculate my profits for the purpose of the tax return.

I just assumed that my profit for the year would be calculated by my total takings from items sold, minus the cost of those sold items, and then minus any legitimate expenses like travel costs, website fees etc.

But I looked at the self-assessment helpsheet (which isn't very helpful at all...) and here is says that 'resellers' have to include the cost of items which they have bought, but not yet re-sold...?

I have no idea how this is supposed to work for resellers of individually bought vintage goods which have an uncertain market value, rather than people who buy in bulk.

Does anyone know how someone like me is supposed to calculate their profit? I really hoped to be able to do it very simply, as above.

I really hope this is acceptable from a tax accounting point of view or I simply have no idea how vintage resellers are supposed to make their accounts add up at all...!

Thanks so much.

Auntie-Dolly

Work out the cost of the items you have in stock at the end of your financial year & reduce the cost of goods by that amount.

antrobus

vestibule wrote: »

...I just assumed that my profit for the year would be calculated by my total takings from items sold, minus the cost of those sold items, and then minus any legitimate expenses like travel costs, website fees etc.

That is correct.

vestibule wrote: »

But I looked at the self-assessment helpsheet (which isn't very helpful at all...) and here is says that 'resellers' have to include the cost of items which they have bought, but not yet re-sold...?

Well yes, 'technically speaking', the "cost of items which they have bought, but not yet re-sold" form part of your 'Purchases' for the period, but you then reduce that 'Purchases' figure by the amount of 'Closing Stock', being the aforementioned "cost of items which they have bought, but not yet re-sold". Which brings you back to the answer you first thought of.

Stick to Plan A.

vestibule

Thank you Antrobus - I think I see what you mean. That's a relief. I notice that Auntie Dolly's post seems to contradict your advice though - is that definitely the not an advisable way to do it (that is, including cost of unsold items purchased, then not subtracting them as 'closing stock'?)

And am I correct in thinking that the value of the closing stock is equal to the price I paid for it - not what I hope it will sell for?

Thanks!

jimmo

Believe it or not, Auntie Dolly and Antrobus have said exactly the same thing, albeit in different words.

To me, the beauty of this particular forum is that if somebody gives you duff information they will be rapidly shot down in flames by other “experts” but, as things stand, if you understand the Antrobus version then go with it.

I would have answered your original question differently to both of the above but if you are struggling with what you have got a third version would probably make it worse. Go with Antrobus.

vestibule

Ah, I see now - I have never done any accounting before, so the different phrasing threw me. I thought Auntie Dolly was saying something else completely.

Thank you all for your help!