Antiques

Antiques

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A client was an antiques collector for many years. He sets up a business with his wife selling antiques. His shop is stocked from his own collection; hardly any stock is purchased. As much of the stock is years old, he has no records of original cost. From a business point of view, he estimates the current value and assumes his cost was 50% of that figure. Often, however, customers negotiate him down. He has no idea of actual profit or loss on sales.

In a nutshell, have any of you come across such a problem and how has it been resolved with the inland revenue ?
Mike

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By Paul Soper
28th Mar 2007 16:24

Appropriation
The assets, if acquired as investments are appropriated into the business at current market value - original cost would only apply if he elected for that treatment. So you value the asset at the date of appropriation and he sells it weeks later, months later or years later for what might be a different figure. The closer he sells it to the date of appropriation the more likely it is to be valued at sales proceeds.

If his trade expands then he may well need detailed stock records for VAT purposes - get him preparing them now.

The Appropriation value is the disposal value for CGT purposes and as long as these are chattels and worth less than £6,000, not constituting a set, or are wasting assets, or through being mchanical - clocks and the like - are deemed to be wasting assets there will be no CGT liability.

Do not pay tax needlessly by appropriating at artificially low figures.

If an asset is within the CGT charge then you can elect to appropriate at cost, but of course only if you know what it is.

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