New sole trader business questions

notanewuser

bigstevex wrote: »

Sorry I meant it this way....

£45k stock to start....
Year 1
£40K of sales using £20K of the stock.

I assume my taxable amount is the £20k I've made on the stock, and not the -5K my balance would technically show?

Just plug your figs into the example.

notanewuser wrote: »

So as a worked example:

£45k worth of stock to start
£20k worth sold for £40k
Storage and selling expenses of £1k
Taxable profit £19k
Tax at 20% = £3800 at 40% £7600
Net profit of £15200/£11400 and £25k worth of stock remaining.

bigstevex

^ I thought so lol, I was having a silly moment!

Next question.... If we start trading now, my first year will show as a loss as I won't be selling straight away but will incur expenses until the end of the tax year, can a loss in 1 year be taken off the profit for the next year? How does that work?

Additionally, the 45K of stock i'm putting into the business to start, can this just go in at RRP if I can't find proof of what I paid for it, would this be deemed reasonable (it would still be profitable).

Mistral001

You can bring items that you bought before you started trading into the business. Many people do this when starting their business. They bring into their business computers and office equipment and treat it as a capital expense where the expense is spread out over several years as far as your accounts are concerned. However, the OP's situation is quite complex due to the amount of money involved and the fact that it is stock and not a capital expense (as far as I know anyway). I would see an accountant due to these complexities (I am not one BTW).

notanewuser

You need proof of what you paid for the stuff. Surely it wasn't all cash and no receipts!

bigstevex

I have proof for say 40K of the stock but there are occassions where I just havent kept a track of the receipt or date purchased, I know it's RRP value though which is there or there abouts what I've paid for it. I'd say 3K of it has been cash though with no receipt for the puchase at all

It's been amassed over the last 3 years or so.

bigstevex

Another question I've just thought of.... Insurance, whereas my collection used to come under home insurance, it'll now be business obviously. Any recommendations for business insurance purely for stock stored at home or should I speak to my home insurance provider (Legal&General)?

lincroft1710

If you're using rooms in your house purely for storing stock, then you may

1) contravene local planning laws.

2) contravene any restrictive covenant on your home regarding no business usage.

3) make part of your home liable for business rates.

Mistral001

bigstevex wrote: »

I have proof for say 40K of the stock but there are occassions where I just havent kept a track of the receipt or date purchased, I know it's RRP value though which is there or there abouts what I've paid for it. I'd say 3K of it has been cash though with no receipt for the puchase at all

It's been amassed over the last 3 years or so.

I think it is the value of the stock when you brought it into your business that counts. You might have to take into account devaluation.

bigstevex

Mistral001 wrote: »

I think it is the value of the stock when you brought it into your business that counts. You might have to take into account devaluation.

They are appreciating assets, hence my business plan Although does that mean I can bring them in at their current market rates?

I.e I paid £500 for an item in 2013, it's now worth £1000, do I bring it into the company at it's cost price or at it's current valuation, obviously with regards to stating profit/loss the higher the price I bring it in at the better!?

bigstevex

If you're using rooms in your house purely for storing stock, then you may

1) contravene local planning laws. (Curious on which planning laws I may contravene, I still have access to the windows/doors etc, I merely utilise them to store things preventing them being used as an actual bedroom though)

2) contravene any restrictive covenant on your home regarding no business usage. (Doesn't exist in all the info I have from house purchase, I remember this years ago when I had a ltd company)

3) make part of your home liable for business rates. (Didn't think of this one... researching it now )