2 Questions.

Hi folks,

I'm starting to trade as an LTD company as soon as I have the bank account ready, but something is confusing me. I've asked my accountant but haven't had a response so far.

If i finish the 13/14 year now my net profit would be (hypothetically) 50k + 10k of stock held. so £60k, however if I sell the stock to the new LTD company whilst still in 13/14 it would still be £60k as the stock would have been sold at cost to the company. BUT, and this is the part that confuses me- if I don'\ start trading as the new LTD company until May, and then I sell the 9k stock to it - that means that 13/14 profit would be £60k and 14/15 (sole trader) profit/income would be 9k. Meaning I'm penalised by waiting two weeks to sell the stock to the LTD company.

Am I understanding the situation correctly?

Second question - I have 2 or 3 large expenses from a personal account back in 2012 before the start of my business which I didn't bother adding to last years accounts as I wasn't going to get taxed anyway, can these be added to 13/14 years accounts at all? And if so, is it possible to show them without drawing the cash?

 

Company year ends are not based on fiscal year ends. You need to get proper guidance on moving business from sole trader to company.

 

Stock is always valued at the lower of cost and NRV (net realisable value) so if at the end your 13/14 you have stock in hand this needs to be valued and then taken off the costs of goods bought during the year to arrive at your cost of sales figure.

 

The stock in hand figure gets carried forward to the next financial year so in your example if valued at £10K at your year end and then sold for £9K to the LTD in 2014/15 you have made a loss of £1K.

 

Q2 - I would claim the business exenses incurred from 2012 in your 2013/14 figures ( strictly you should go back and amend the 2012/13 year to include the correct figures).

 

Thank you for the replies - and for reading my post properly ( I do appreciate it wasn't particularly well articulated). I'm still trying to understand how I would make a £1k loss in that case? As surely it's all profit? Or am I missing something.

Are there any rules or regs that stop me from doing that? And if I do claim in 13/14 do I have to draw them from the sole trader accounts?

 

@faradaykeynes - whilst I do appreciate the help and replies you give on this forum, it's quite often you don't read the OP properly. I'm not talking about LTD co accounts, i'm talking about sole trader accounts.

 

That part I do understand! Thanks though, you've been very helpful.

 

Gross profit = sales less cost of sale ( COS = opening stock + purchases less closing stock)
You can sell stock at loss if you like, if it is not case of transfer of business as going concern then cost or NRV does not matter
Secondly Is your sole trader business same as ltd company?

 

You don't need to physically draw the money back from your sole trader bank account. Just record as an allowable business expenses. Will be treated as capital introduced if your Accountant prepares a Balance Sheet as part of year end accounts.

You have until 31 Jan 15 to amend your 12/13 accounts and Tax Return to include the extra business expenses, but as prevsiously stated if was preparing your 13/14 accounts I would just include them (assuming they do not stick out like a sore thump !).