starting as a sole trader

jammalmccook

I would like to start a small business selling and buying clothing and footwear online. I would like to register as a sole trader so that I can pay taxes on any profits I make.

Over the last 3 years I have been buying clothing and footwear items which I would now like to sell.

My question is how do I account for these items which I have bought in previous tax years. If I was to start the my business lets say the 1st of September 2019 can I declare all this stock I have or can I only declare stock which I purchase after I have registered as a sole trader?

Any help will be really appricated.

Pennywise

You bring in the stock you have bought personally but now wish to sell at current second hand value. You can't bring it in at new cost price because it's used. So you'll basically bring it in at the price you're going to sell it for, so no profit/no loss on those items.

jammalmccook

Thanks for the reply.

The stock that I have acquired is all New and unused stock. Most of the stock is now worth more than what i paid for it (hence why I want to sell).

My problem is how do I account for items bought in 2017,2018 when completing my tax return for the current tax year.

Pennywise

If it's new and unworn/unused etc., you bring it in at your cost price.

jammalmccook

Awsome thanks for your quick reply.

So I bring the items (stock) in at cost price. Should I file all my receipt of purchase etc incase i am asked for them in the future?

thanks

Aquamania

What was your thinking 3 years ago when you started purchasing these items???

Were they intended as accumulating stock for a business you planned to launch later? Goods you bought with the intention at the time to sell on at a profit? It seems strange to buy stock such as clothing that tends to come in and go out of fashion within months, years in advance.

Or were you at the time simply buying things for yourself which, for whatever reason, you have never worn and, as you now have discovered to your surprise, have increased in value, so simply wish to sell them?

Aquamania

jammalmccook wrote: »

Awsome thanks for your quick reply.

So I bring the items (stock) in at cost price. Should I file all my receipt of purchase etc incase i am asked for them in the future?

thanks

HMRC never expect anyone to file receipts; all they want are your accounts.

You will be expected to be able to provide evidence in support of your accounts only IF HMRC later ask for that evidence.

jammalmccook

My intentions where to purchase these items to sell on at a later date. I just never had the time to do so.

Not everything will fetch me a profit but most items will. It's basically a hobby of mine which I belive I can make money from. I could just sell the item, however I dont want to fall foul of tax laws therefore I would like to set myself up as a sole trader and pay taxes on any profits.

I am employed and work full time.

The type of clothing and footwear I buy is known as hyped items which are difficult to get hold of. Therefore demand is high , with people willing to pay a premium for them.

jammalmccook

Okay so basically, I should just keep all my receipts for items I buy to be sold on or for the expense of running the business.

thanks for the reply

Aquamania

jammalmccook wrote: »

My intentions where to purchase these items to sell on at a later date. I just never had the time to do so.

Not everything will fetch me a profit but most items will. It's basically a hobby of mine which I belive I can make money from. I could just sell the item, however I dont want to fall foul of tax laws therefore I would like to set myself up as a sole trader and pay taxes on any profits.

I am employed and work full time.

The type of clothing and footwear I buy is known as hyped items which are difficult to get hold of. Therefore demand is high , with people willing to pay a premium for them.

I think you need to find yourself some professional advice.

If you were buying the goods with the intention of reselling them at a profit, then you were running a business.

If you happened to buy some goods which, at the time, you did not intend to resell at a profit, then it sounds like a hobby as you say.
The fact the clothes have miraculously increased in value over the 3 years you have held them is just a fortunate coincidence.

But as I say, with fashion changing within months, you will never make a successful business buying years in advance, not in the retail clothing trade.
That's why all the clothes shops are currently selling off their summer clothing cheap. People will want to be buying winter clothes soon, and whatever summer stock they have left over this year will not be in fashion next summer.

Even the big boys can get caught out. They only have to order clothes months in advance, not years, yet can still get fashion expectations spectacularly wrong at times. e.g. Marks & Sparks.

jammalmccook

Thanks for your all your advise. Yes I will seek professional advice