Handling of closing stock in books - cessation of trade

eimearnid

Hi all,

I'm looking for information on how to deal with stock in the final set of accounts of a sole trader who has ceased trading this year. The stock won't be sold on, the person will hang on to them.

Is stock valued at Selling price or cost price?

And are there any other considerations for the final set of accounts to be taken into account - different to the normal set of accounts?

A few pointers/steps would be great! Thanks

J.Ryan

Stock is to be valued nil and the purchase value to be journaled to drawings.

You can't count the purchases for tax purposes

barneystinson

J.Ryan wrote: »

Stock is to be valued nil and the purchase value to be journaled to drawings.

You can't count the purchases for tax purposes

+1

And not counting the purchases for tax purposes means you will have to repay any VAT claimed on the cost of those purchases.

eimearnid

barneystinson wrote: »

+1

And not counting the purchases for tax purposes means you will have to repay any VAT claimed on the cost of those purchases.

Hi just to clarify, all stock was purchased in 2006 and stock units have been sold thoughout the last few years. The remaining stock is just not selling. This is why the person would like to cease trading.

When you say don't count the purchases for tax, do you mean any purchases or stock purchases? The only costs to the business at the moment are administration costs.

The business was de registered from VAT in 2009.

Thanks all!

barneystinson

eimearnid wrote: »

barneystinson wrote: »

+1

And not counting the purchases for tax purposes means you will have to repay any VAT claimed on the cost of those purchases.

Hi just to clarify, all stock was purchased in 2006 and stock units have been sold thoughout the last few years. The remaining stock is just not selling. This is why the person would like to cease trading.

When you say don't count the purchases for tax, do you mean any purchases or stock purchases? The only costs to the business at the moment are administration costs.

The business was de registered from VAT in 2009.

Thanks all!

The VAT should have been repaid in 2009 then... Think about it this way:

I register for VAT as a car dealer.
I buy a high end car as stock for resale and I reclaim the VAT.
I decide I can't sell the car so I deregister and cease trading.
I keep the car.
I'm now ahead to the tune of the VAT I reclaimed on the car.

That's a very simplistic example but shows how the system could be abused (not that that's what's going on in your case).

The VAT on the cost of purchase / construction of the stock units was reclaimed on the basis that there would be a VATable disposal of those units. At the point where the business deregistered then the VAT reclaimed in the cost of stock on hand should've been repaid on the final VAT return.

eimearnid

barneystinson wrote: »

The VAT should have been repaid in 2009 then... Think about it this way:

I register for VAT as a car dealer.
I buy a high end car as stock for resale and I reclaim the VAT.
I decide I can't sell the car so I deregister and cease trading.
I keep the car.
I'm now ahead to the tune of the VAT I reclaimed on the car.

That's a very simplistic example but shows how the system could be abused (not that that's what's going on in your case).

The VAT on the cost of purchase / construction of the stock units was reclaimed on the basis that there would be a VATable disposal of those units. At the point where the business deregistered then the VAT reclaimed in the cost of stock on hand should've been repaid on the final VAT return.

Yes, completely understood re VAT situation and yes when person deregistered for VAT, VAT on stock purchases repaid then.

What I'm looking for is a clarification - I understand for any remaining stock , I journal all closing stock to drawings if person decides to keep the stock.

Can the administration costs still be expensed against sales made in year of cessation basis period? Are there any other "quirkes" with year of cessation accounts other than purchases/stock? Thanks again.

J.Ryan

Each case is individual, but you can make the argument to claim admin costs, provided that there was income, however, this is a general answer and without specific knowledge of your individual query.

The revenue have options regarding profits over the previous 2 or 3 years that they may use, but thats it really, no prepayments, minimal accruals.

If there are assets where capital allowances have been claimed there may be adjustments required there also.