Press Releases
Accountants Warn Businesses on Using Own Stock
Bradford chartered accountants Watson Buckle are warning business owners that the taxman is likely to be taking a closer interest when stock is taken for private use.
The 2008 Finance Act contains measures, which puts onto the statute book a long-standing approach by HM Revenue & Customs (HMRC) towards the transfer of trading stock.
The legislation applies to all trading stocks taken out of a business, but not sold as part of the business’s trade, and requires these to be treated as sales at market value, rather than at cost; the business being taxed on the notional profit. The rule also affects all land and property transactions made by individuals, partnerships or companies on or after 12 March 2008.
The new rules confirm an HMRC approach that dates back to a House of Lords ruling in 1955, which concerned the valuation of horses transferred from a stud farm – a taxable business – to a racehorse stables, a non-taxable private hobby, in 1948.
Chris Padgett, Watson Buckle managing partner, said: “While putting this approach into law has clarified an issue that has involved long-standing debate, lack of publicity since the Budget means that businesses could be falling foul of the law without realising it.
“The legislation has particular implications for businesses involved in property or construction. The owner may build or invest in a property, and then finds no interested buyer – especially at a time when the housing market is slow – and so acquires it himself. He could find himself taxed on a profit that does not actually exist in monetary terms.
“Like many areas of tax, this is a complex area and business owners would be wise to seek professional advice.”
For more information, contact Watson Buckle on 01274 516700.