Tax question please

[defender tipper]

Dare I ask, How does the goods for resale work?

I have bought a large amount of wood this year for proccessing,my question how is this taken in to account on my tax bill?

I.E will the whole amount come off gross profit for this year or is it spread over several years,thats bearing in mind we are buying

timber every year....Thanks for any help

[Jamie Jones]

Lets say you buy £ 100 work of wood. This would be reflected in your accounts as material costs and will be shown as stock on your accounts ledger. 

 

Lets say you have a quick'ish turn  around and sell it all within a couple of months. Lets say that you sold it for £ 140.... 

 

This means that you have the following:
- £ 100 as an out going that is classed as stock:
+ £ 140 as income.
-------

= £ 40 as profit... You would therefore be taxed on £ 40 as profit

Now if you hold stock and it has not be sold in this tax year you will claim £ 100 against your tax bill as an outgoing that will be help in your stock column and it is classed as an asset. 
- If you then sell it in the next tax year (for the same £ 140) you will then be taxed on the full £ 140 because you have already claimed £ 100 of it in the previous years tax.

I hope that is clear

[defender tipper]

Yes Thats very clear,and thank you

[Steve Bullman]

Don’t forget that the stock that is still sitting there next year is going to lower in value. Obviously a lot of it will be too far gone to sell and in the worse case scenario you might have to skip it.

 

I suggest you get yourself an account who is on the ball on such matters ?