Can anyone advise on a small business start-up question ?

Bogwhoppit

Treat me like an absolute idiot on this subject, for I know nothing

If I was starting a small business (sole trader) selling books, and I introduced 5,000 of my own books into the business that I'd accrued over the past 20 years. Would they be classified as stock that could be claimed against, i.e. pre-trade expenses ?

Gassage

Bogwhoppit said:

Treat me like an absolute idiot on this subject, for I know nothing

If I was starting a small business (sole trader) selling books, and I introduced 5,000 of my own books into the business that I'd accrued over the past 20 years. Would they be classified as stock that could be claimed against, i.e. pre-trade expenses ?

Technically, you can transfer the asset, claim its market value to the sole tradership and offset. Spk to an accountant.

Bogwhoppit

Gassage said:

Bogwhoppit said:

Treat me like an absolute idiot on this subject, for I know nothing

If I was starting a small business (sole trader) selling books, and I introduced 5,000 of my own books into the business that I'd accrued over the past 20 years. Would they be classified as stock that could be claimed against, i.e. pre-trade expenses ?

Technically, you can transfer the asset, claim its market value to the sole tradership and offset. Spk to an accountant.

I can't afford an accountant (or a dentist), so I thought I would take the cheap way and ask on here lol !

guitarcookie1

Yes, capital introduced at market value (whatever that may be).

Gassage

Just call a local acct on spec, say you're looking for one, then ask the question

Bygone_Tones

Im no expert, but I would think as you didnt buy them as stock for your business, then they could be sold separately as personal non-business items without having to paying income tax on them. So leave them off the business accounts altogether, or record them separately. Better getting pro advise of course.

Bogwhoppit

guitarcookie1 said:

Yes, capital introduced at market value (whatever that may be).

Its the market value that's screwing my head up.

I'd have thought I was selling them at market value, therefore, I'm finding it strange to claim the same market value for asset transfer. I need a lay down

ESBlonde

It becomes capital introduced to the business in the same way a cash injection would be considerred, the problem is putting a realistic value on the Second hand stock. After a period of trading you would have bought a qauntity more of books and sold them giving a notional value to the new stock purchases that you could apply retrospectively to the introduced stock. Say you buy 400 books that cost you nominally £1.70 each on average and sell for £5.00 each on average, you could argue reasonably that your books were worth £1.70 each or £17.00 a hundred. If you own any 'special' example books worth £100s to a collector I'd be tempted to hold them out as private sales on evil bay or whatever.
If you over value the stock the tax man will need you to prove why or ask you to pay the extra he would have seen in profits had a realistic value been applied.

Bogwhoppit

ESBlonde said:

It becomes capital introduced to the business in the same way a cash injection would be considerred, the problem is putting a realistic value on the Second hand stock. After a period of trading you would have bought a qauntity more of books and sold them giving a notional value to the new stock purchases that you could apply retrospectively to the introduced stock. Say you buy 400 books that cost you nominally £1.70 each on average and sell for £5.00 each on average, you could argue reasonably that your books were worth £1.70 each or £17.00 a hundred. If you own any 'special' example books worth £100s to a collector I'd be tempted to hold them out as private sales on evil bay or whatever.
If you over value the stock the tax man will need you to prove why or ask you to pay the extra he would have seen in profits had a realistic value been applied.

That's cleared the mist

Yes, I would be introducing more books, so that makes it easier to value the existing books I will be transferring. There are specialist books included, at least 5% with a collectors value.

If I was to make the analogy with guitars, and I was transferring a personal extensive guitar collection, but holding back the more vintage stuff. Would the taxman raise an eyebrow if I sold 'my' vintage guitars on a personal level, but continued to sell the vintage guitars I secured for the business, through the business ?

The perception I have is the tax man shoots first and asks question later.

fretmeister

If you can't afford an accountant for initial advice I would be wary of starting up in the first place.

mgaw

you can hold back whatever vintage guitars you want......and still sell them privately....why not. just because you have a business it doesnt mean you cant sell private stuff.....just be wary that you dont be seen to be conducting business off the books so to speak.

In other words keep business and private very seperate

Bogwhoppit

fretmeister said:

If you can't afford an accountant for initial advice I would be wary of starting up in the first place.

I'm investigating the viability of the model first, once I've established a few basic FAQ's, then I can make an informed choice whether to sell an extensive marketable collection privately, or turn it into a business idea and seek more stock. Through sites like this, the UK business forum and others, I should be able to obtain those core answers. If then, I like the idea, I'll flog a few thousands worth privately, and then consult an oracle.  As its not going to turn me into Dicky Branson or Mr Trump, I need to watch my pennies carefully.

fretmeister

Do a fully business plan and take it to a bank for a small business loan. They will either shoot it down or allow it. Then don't take the loan even if they are happy to give it. You get their views on your plan for free.

Bogwhoppit

fretmeister said:

Do a fully business plan and take it to a bank for a small business loan. They will either shoot it down or allow it. Then don't take the loan even if they are happy to give it. You get their views on your plan for free.

I have an appointment with the bank next month, I was hoping to look a little less like a rabbit in the middle of the road before I got there. lol

I don't require any start-up costs (apart from consulting an accountant) as I already have the stock, premises, computer systems...and slave labour (kids are great when they need a summer job during uni)

Bogwhoppit

mgaw said:

you can hold back whatever vintage guitars you want......and still sell them privately....why not. just because you have a business it doesnt mean you cant sell private stuff.....just be wary that you dont be seen to be conducting business off the books so to speak.

In other words keep business and private very seperate

Its convincing the tax man the two are not linked. Especially when private sales will be via Gumtree and be concluded with cash. I think ultimately, that's my main concern.

Back onto the subject of guitars.

A very good friend of mine has been de-gassing his guitar collection, including a couple of 70s Fenders and a collection of R7-R0 Gibson's. He's paid a substantial amount of cash into his bank, and was then contacted by HMRC. His still dealing with them nearly a year later. They want to see all his original invoices and can't seem to understand that he bought many of them through gumtree using cash in the first place. Its becoming a nightmare because there are connotations of money laundering aimed at him.

Blimey, the tax man would have a field day on here !

Snap

I have been a business owner for 15 years, and one thing I would advise is never scrimp on professional advice. It will save you money in the long term and affords you all manner of protection. It is also tax deductable.

Also, there is a lot of info to be had from Companies House website, and also all the banks will be able to supply you with a lot of free advice once you set up a business account.

See what is available from your local chamber of commerce too. They often can supply a lot of good free info.

scrumhalf

mgaw said:

you can hold back whatever vintage guitars you want......and still sell them privately....why not. just because you have a business it doesnt mean you cant sell private stuff.....just be wary that you dont be seen to be conducting business off the books so to speak.

In other words keep business and private very seperate

That won't satisfy the Revenue. One of the "badges of trade", the things that separate the private transaction from the business transaction is quantity.

See Rutledge v CIR, where a taxpayer claimed that a million toilet rolls were not purchased for business purposes or invetment, but for private use.

What you also need to understand is that just because you may be in the right, if the Revenue come after you it may cost you a packet to defend your case, especially if they think you've not been up-front with them.

Bogwhoppit

Snap said:

I have been a business owner for 15 years, and one thing I would advise is never scrimp on professional advice. It will save you money in the long term and affords you all manner of protection. It is also tax deductable.

Also, there is a lot of info to be had from Companies House website, and also all the banks will be able to supply you with a lot of free advice once you set up a business account.

See what is available from your local chamber of commerce too. They often can supply a lot of good free info.

Along with what everyone else has advised in the thread, I've taking it on-board and have emailed a couple of local accountancy practices for quotes on initial advice and on-going support in my first year

Bogwhoppit

scrumhalf said:

mgaw said:

you can hold back whatever vintage guitars you want......and still sell them privately....why not. just because you have a business it doesnt mean you cant sell private stuff.....just be wary that you dont be seen to be conducting business off the books so to speak.

In other words keep business and private very seperate

That won't satisfy the Revenue. One of the "badges of trade", the things that separate the private transaction from the business transaction is quantity.

See Rutledge v CIR, where a taxpayer claimed that a million toilet rolls pedals were not purchased for business purposes or invetment, but for private use.
.

Gassage is screwed with his pedal investments then

mgaw

scrumhalf said:

mgaw said:

you can hold back whatever vintage guitars you want......and still sell them privately....why not. just because you have a business it doesnt mean you cant sell private stuff.....just be wary that you dont be seen to be conducting business off the books so to speak.

In other words keep business and private very seperate

That won't satisfy the Revenue. One of the "badges of trade", the things that separate the private transaction from the business transaction is quantity.

See Rutledge v CIR, where a taxpayer claimed that a million toilet rolls were not purchased for business purposes or invetment, but for private use.

What you also need to understand is that just because you may be in the right, if the Revenue come after you it may cost you a packet to defend your case, especially if they think you've not been up-front with them.

i disagree the OP said he had a few "special" ones and many many more "regular"....therefore there is no issue of quantity...using as an example a proprietor of a guitar store...there is nothing to stop them building up a private collection is there.....and in due course sellibng some of them from his own collection as a private individual.

I have owned restaurants in the past and did invest personally in wine which i then resold ...revenue had no problem as it was clearly outwith the business.

mgaw

Further to the above. as long as the OP doesnt include them in his opening stock or any time after, they wont constitute part of his business...now obviously if he had loads and was using his shop/site to sell them on his behalf, then that would be another matter.

Furthermore i would doubt very much that if someone was so minded as to sell "off Book" the revenue would clock it, if they did most restaurants, garages, heck most small business would be collared