Hi, I hope somebody could help with this dilemma!
I am assisting a friend with the incorporation of a limited company.
The company will be a shop that sells comic books.
They currently hold around 150,000 comic books with a total estimated value of £1.5million. These were given to them by their granddad (private collection/hobbiest) around 10 years ago and they have finally decided to sell them. Please note, their granddad is still alive.
With regard to introducing these to the company, there is no definitive way to estimate the net book value of the comics. They can only be valued on the expected sales value at current market price.
How would these amounts be introduced into the limited company accounts.
Can capital allowances be claimed on these?
Please can anyone advise on the best way to proceed.
Thank you in advance
Nathan
Replies (13)
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ebay
Thanks Phil
Currently finances are not available for any professional advice and wanted to find out some information about valuation before any stock is sold!
Valuing 150,000 comics worth £5-10 each is very difficult!
Bang 200 on ebay and start getting some paid for advice :)
Agreed
I concur with the above. You won't be getting CAs on stock in trade.
I'm not tempted to look at legislation; can't be bothered.
However, I think as a starting principle you must introduce them at zero cost or granpa's base cost. If your client has some legislative mechanism for inheriting papa's base cost then its going to be marginal in any case.
Your client has paid nothing for them and expects to sell them for a profit. That's what is taxed. A profit.
Your client may be better advised to dispose of them over the years on the internet or perhaps even just go to an auction house and sell a job lot thus securing CGT instead of IT/CT.
If I had the choice between £1.5m over 10 years (I guess, I know nothing of the comic book market) compared to taking £1m now... I'd be on a yacht.
Might even take granpa with me.
Personal property?
Surely this is personal property and not trade stock? Why introduce it to CT?
Well, at least
I'd be willing to help further but I'd have to ask for 600 comic books.
Well, at least cheaper than PWC, KPMG,EY or Delotites as they would no doubt want all the fantastic four comics held.
Points
With that volume of paper where stored and how stored springs to mind, if held in a house cannot see house insurer being happy (used to have a tenant who made greeting cards which our portfolio insurer hated).
Having been selling inherited model railways since 2013 ,and certainly not 150,000 lots just 6 large boxes full, I know how time consuming listing, packing and despatching can be, there is a life's work knocking out 150,000 comics as individual sales.
If I were the OP's client I would be looking for some job lot trade sales but I suspect using a dealer/agent is the best approach.
Re tax question 1 surely has to be, how did Grandad deal with their gift to grandchild re CGT 10 years ago?
Perhaps we should first ascertain whether selling these comic books would consititute a trade.
If the comics are sold one by one, or in small batches, then it looks to me like a systematic series of transactions for profit - so a trade exists and the profits must be taxed.
If the comics are sold in bulk (in one lot to a dealer or a small number of lots to separate dealers, perhaps via auction) then no trade exists and the receipts are exempt from tax.
So the first task is to decide whether the net receipt from a taxable trade (possibly spread over a long time period) is significantly greater than the non-taxable receipts that could be gained from a small number of wholesale disposals that are unlikely to be taxable. To do this correctly it is probably necessary to get an independant valuation of the comics; this may just be a question of asking a couple of existing dealers to make the owner an offer for some or all of the collection.
If it is subsequently established that commencing a trade is the most lucrative use of the comics, then they become trading stock and should be introduced to the trade as such. The mention of capital allowances baffles me, and forces me to ask whether you should be assisting your friend with incorporation when you do not seem to have the necessary knowledge or experience to help at all.
So many more questions. Have you considered whether or not to register the company for VAT, and if not whether you need to apply for exempt status? This itself will depend on a number of factors. I would ask more but we would be here all week.
Perhaps the best course of advice may be to admit your own inexperience to your friend so that he remains your friend and you do not subsequently have a falling out over the potentially large sums of money that could be forfeit should incorrect advice be acted upon.
Beyond that, I would not recommend that anybody startup an enterprise with a potential turnover of £1.5 million without taking professional advice.
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I would suggest you tell your friend that you are out of your depth, and get some proper paid for advice.
It simply is not credible that your friend 'cannot afford' this help. Even if you have zero cash, a reputable firm may be willing to accept deferred payment, secured on the assets, albeit at a premium no doubt.
Is this not possibly a set within
Is this not possibly a set or sets within the scope of CGT or am I really missing the point?
(tax on chattels is not something I, as a rule, ever need to consider)
speciailist valuer +auctionneer
far quicker to get them 'appraised' by a specialist auctioneer
advise as to one or several lots and values
could be cashed-up in days ratter than setting up to trade andover many periods/years of compliance time and accounts
with value in mind you could consider the tax implications [ and could plan to dispose over >2 tax years if they are deemed as CGT''ble ]
Estimated Value
Not sure how you arrived at the estimated value, but you would need to have some pretty unique issues to get to that value. I would be more inclined to value at around 50p per issue as an average.
Having a collection myself of around 55,000 books it costs more to store them than they are valued at....but it is a hobby for me, not a business!