Thank you for your reply...
Closure of your late husband’s business would necessitate cancellation of VAT registration. It appears from your response that the business has not not carried on since your husband’s demise.
Any finished paintings in stock would have to be valued for VAT purposes and inheritance tax purposes. If you can not work this value out, you should value the goods at the price it would cost to produce them at the time your registration is cancelled. This would reflect the cost and not potential profit at a future date. Normally accounting rules state, and it is an acceptable base, that stock should be valued at the lower of cost of net realisable value.
You may establish that trying to sell these paintings in the open market at the wrong time would fetch a much discounted sale proceed and that may form the bases of your valuation.
VAT can’t be avoided but you can request deferrment of payment on the grounds that monies would only be realised once some of the paintings are sold.
My advice would be to maintain a positive dialogue with VAT office to establish
- The VAT liabilty
- A payment plan to clear the VAT liability.
I had a chat with VAT Office and was unable to get a definitive response. The advisor suggested you write to them and ask for a ruling on valuation of unsold paintings before you.
Don’t be afraid of appealing against VAT Office decision and take the matter to VAT tribunal. At that point, you may wish to engage a VAT expert to present your case.
Sections relevant from VAT Notice 700 can be found on this link
7.6 -Cost of supply
9.1 - Disposal of business asset
19.5 - Recording supplies you make and working out your output tax.
You may also find this article of interest
I hope this is helpful and answers your question.
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