Stock inventory for taxation

J.O. Farmer wrote: »

Well said Larry, the beef farming charities get the animals to slaughter weight.

hello folks just looking for some info on the books. Doing the books and last year I paid out more money that I brought in by about 20k so was expecting a loss on the books but accoutant is saving I made a profit of over 40k due to the stock in the herd. (Stock numbers increased in 24 as they will in 25 as I am only getting going). Anyone any knowledge on this as I’m just confused. Same thing happened last year as that was my first year trading i made zero sales and only expenditures in 23 but ended up with a profit last year due to the stock numbers which annoyed me no end.

To work out gross profit (profit before expenses/profit from buying to selling/fools profit)

Sales - ( opening stock + purchases - closing stock)

So what that means is that the purchase of stock is only counted as an expense the year you sell that stock not the year you buy them.

Stock is essentially money in the bank.

The problem this year a lot will have is the value of stock has nearly doubled once they stood alive so your current assets have doubled. This profit has never came in or out of bank account but you have made a taxable profit of the amount your stock value has increased.

As others have said several stock relief options out there but I'm thinking most beef farmers (except young farmer) doing true accounting will have large PAPER profits this tax year. Others will chose to be creative with stock value and will get away until destocking or whenever they dispose.

If you have stock valued correctly the tax is paid each year as the value of the stock increases so your 'real value sales' shouldn't leave a frightening tax liability

Didn't think so but not an expert.

I don't think revenue over stress about your valuation because all you are doing with low values is putting off the bad day.

If you keep rising the value as an older farmer you'll either end up pay more tax on paper profits or if over valued make a loss on paper loss. But as a young trained farmer there is a 100% stock relief and in a partnership 50% stock relief in the south as I understand. As I understand if you bring in funds from outside of the partnership to buy stock it's taxable, but if you use funds from within the partnership you get 50% stock relief, again in the south. Then there is income averaging over any 3 years. It hard for any person in an office to value an animal, take a look at what the department are giving for tb reactors in your area and make your mind up, have never heard of a farmer being pulled over the coals over valuations.

Y.es accountants use a value of 60%

I'm afraid 😨 of going to the accountant this year, because 2024 was a good year for milk and I had had 16 reactors which avg 1900.

I know my stock were valued low, as I'd usually only sell yearlings or old culls,

I didn't get clear till this year, and I had heifers coming in, so I only bought 2 bulls.

I joined tax averaging a few years ago.

Any tricks to tell me, so I don't have to give away half the money I got for my cows?

V.alue of stock changes continually. Revenue accept this figure but it cant be changed at will. This year will be different with the huge increase in stock value

Problem with sheds and tractors is they are wrote off over 7 or 8 years. You could pay 50k for either out of profits and only knock a few grand off your tax bill.

Also pay for too much of it out of profits and you could end up struggling to pay the tax bill next year.

well then things worked out perfectly for you. Do you hope to have it ready for this year? Are you going into extra stock?

I’m the same, I’d rather exspensive stock than a exspensive tractor

Yes forgot about that. I’d love to go building again but am maxed out with stock for nitrates. Have enough accommodation for 200 finishers, between full time job and all I’ve probably enough slatted sheds.

I am going to throw up a machinery shed/ workshop and do a few bits of concreting.
Pay the kids plenty and top up the pension.