Collection or business assets

Collection or business assets

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Help and opinion on this rather unusual set of circumstances.

Client has traded as a fossil collector dealer for many years. Over that time he has collected fossils for reference purposes and also made exchanges with other dealers. This reference collection has a nil cost as none actually bought. Client will retire in the near future.

Client is a sole trader - the collection has a nil base cost and therefore has not previously been shown in his financial statements. 

Client out of the blue has received a substantial offer for his reference collection circa £500k.

I think that this qualifies as a business asset and will qualify for entrepreneurs relief.

What are your thoughts do you agree?

Replies (4)

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By Steve Kesby
31st Jul 2014 19:45

Struggling...

... with concept of a trade of collecting fossils for reference purposes. How does the income from that element of the trade arise.

To the extent that the fossils are held for a trade of dealing in fossils though, they are, of course, stock. Ouch!

Thanks (0)
PJ
By paulgrca.net
01st Aug 2014 10:39

Thanks Steve but please note

circumstances outlined are all true however  I have changed nature of trade slightly for confidentiality purposes. Fossil collecting is the nearest thing I could think of without giving the game away.

As I understand things the collection is maintained purely for reference purposes and has not been part of the trading stock ( the occasional specimen has been exchanged from time to time but this is only when better examples become available).

Any further thoughts?

Thanks (0)
By Steve Kesby
01st Aug 2014 10:58

Is your client...

... Lara Croft?

I'd say you need to run with both arguments. Is it tenable to take the view that they are not a set?

See CG76632 and THIS Readers' Forum query (which may need you to have a registration/subscription).

If it's not a tenable argument, or the argument fails, then:

Do the fossils have a useful life of less than 50 years (I'm guessing not, unless they're perhaps mechanical fossils)? and were they eligible for CA's (whether or not claimed)?

Otherwise, I'd accept that ER is available (on the basis that they've been used for the purposes of the research trade, carried on for at least a year) if they are sold at the same time that the trade ceases or within three years of cessation.

Thanks (1)
PJ
By paulgrca.net
01st Aug 2014 11:14

Thanks Steve

More Indiana Jones than Lara Croft.

That's a great help

 

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