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Sam
Sam, Accountant
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I jointly owned a bookshop with my wife. This closed on 30/3/2011.

Resolved Question:

I jointly owned a bookshop with my wife. This closed on 30/3/2011. The stock in last year of trading was valued at £21,000. It is now valued at nothing. Can I claim a loss against my current income tax bill in my self assessment form?
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.

Thanks question
What happened to the remaining stock? Did you sell it on - if so how much what date ? If you did not sell it what happened to it?
Thanks
Sam
Customer: replied 2 years ago.

Books were sold in shop at ever reducing prices in closing down sale until nominal amount of unsaleable old stock remained. I still have some old unsaleable books.

Expert:  Sam replied 2 years ago.

Thanks response and the additional information.
May I ask why this was not reflected in your final accounts (tax return submission) as you would have traded right up to the final day of the closing down sale and having £21,000 stock at this time does seem excessive, so can you advise further.
Was perhaps the stock over valued ?
I just want to make sure we are getting the figures right and also establish the cost of sales position at the start of the final year, as you would have carried forward stock on hand, then added in new stock purchased then deducted the actual stock sold, to reach the correct cost of sales figure.
Did you sell anything after 30/03/2011 has this income been declared? If so then HMRC will argue that you took this as personal stock and this should have been adjusted through the final cost of sales figure.
But when you are sure you have the right figure this must be used to adjust 2010/2011 final accounts as this is the year it would all be relevant for - unless you continued to sell stock thereafter - if so, then you continued to trade after 20/03/2011 and this needs rectifying - so let me know a little more please so I make this as tax efficient and your wife as possible
Thanks
Sam
Customer: replied 2 years ago.

Stock at start of last trading year was in accounts as £22,999. Plus VAT at £75 and cash at bank of £418. Stock gradually reduced over last year of trading with most going at Christmas 2011. I did not have accountant at end. Sales were included in books and counted as profit.

Stock was valued by physical stocktaking some years ago at purchase price and then simply brought forward each year. We have tried to sell remaining stock by word of mouth to other traders without success. Stock is basically valueless.

My wife and I are legally a partnership. We also have a civil engineering consultancy

Regards

David

Expert:  Sam replied 2 years ago.
David
Thanks response
There are two issues here
1) the difference between the value of an item and its sale price during the closing down sale, which should have been claimed as a loss at the year end accounts by adjusting the cost of sales figures and
2) the stock actually physically left over at the year end, which either has to be treated as
i) stock that you then took ownership of personally (so has to be added back into the profits) OR
ii) Had a negligible value - and was disposed off (which is what you are indicating) which should be added back into the cost of sales figure as stock sold (at the value to represent the purchase cost rather than the NIL cost)
So in essence all adjusted through the cost of sales figure so there is NIL value of stock remaining.
But this all has to be adjusted on the final accounts - and as this is a partnership - should have been amended within 3 years of the filing date - so 2010/2011 filing date 31/01/2012 - so get this done as a matter of urgency as the cut off point is 31/01/2015.
If you did not have an accountant, final year. I assume you completed your own partnership return - and this would have been as a paper return (unless you used third party software) so just write into HMRC and ask them to adjust the cost of sales figure on the return so the relevant amount.
This then, if it creates a loss and you then request what you wish doing with this loss. (set off against any taxable income also received year OR to carry back as terminal losses or forward if you had further profits from any sales of books.
Thanks
Sam
Customer: replied 2 years ago.

I filled in three returns: on line wife and myself, and on line using software. Tax was paid in personal assessment with none on partnership. Can I include loss in self assessment year? My tax year this year is 1 October 2012 to 30 September 2013.

Regards

***** *****

Expert:  Sam replied 2 years ago.

Thanks response
First you need to adjust the partnership return /2011- then IF there is a loss, this is then split between you and your wife (and shown to be split on the partnership return) and once you are satisfied that HMRC have made that adjustment then you can filter each of your losses through onto your own tax returns same year (2010/2011)
Then once all of that has been rectified you can ask loss to be
1) Carried back or
20 used in the year in which it arose. as you cannot carried forward a loss on a trade that no longer exists - which is why I asked whether you have continued to sell books, and in essence continued to trade (which is still not clear)
But if you do not continue to trade with the books (has to be the same trade) you cannot carry this loss forward.
Thanks
Sam
Customer: replied 2 years ago.

Thank you very much

Expert:  Sam replied 2 years ago.
David
You are very welcome, let me know if you need anything else from this question, but it would be appreciated if you could rate the level of service I have provided, so I am credited time
Thanks
Sam
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