New client forgot to take stock count at the year end

New client forgot to take stock count at the...

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Hi,

I recently took on a new client, who is running a corner shop. This is his first year and initially thought he can handle accounting and tax affairs on his own but realised need help and came to me. What would be the best practice to asses the value of year end stock for me to arrive at the cost of sales. client came up with an estimated figure, but not sure if this is acceptable for self assessment. grateful for any comments.

Many Thanks

  

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Euan's picture
By Euan MacLennan
28th Jan 2015 15:41

A taxpayer's estimate is acceptable for self-assessment

Self-assessment is just that.  It is the taxpayer (client, AKA HMRC "customer") who is self-assessing his tax and if he includes an estimate of his closing stock to arrive at his cost of sales, so be it.  It might not be acceptable to HMRC if they start an enquiry.

Two thoughts:

If his stock is much the same now as it would have been at his accounting date, ask him to do a stocktake now.Find out the typical GP % for his type of business and see if that corroborates his estimate of stock.

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Replying to spidersong:
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By [email protected]
28th Jan 2015 16:09

Stock estimate

Euan MacLennan wrote:

Self-assessment is just that.  It is the taxpayer (client, AKA HMRC "customer") who is self-assessing his tax and if he includes an estimate of his closing stock to arrive at his cost of sales, so be it.  It might not be acceptable to HMRC if they start an enquiry.

Two thoughts:

If his stock is much the same now as it would have been at his accounting date, ask him to do a stocktake now.Find out the typical GP % for his type of business and see if that corroborates his estimate of stock.

Which I have done, the stock figure client gave me is more or less agree with my calculation. I wonder if this is acceptable to HMRC. I wonder if I have to disclose this fact in the other information to the tax return. client is very co operative and this is a genuine mistake and I don't want any HMRC inspection at this stage of his business.

Many Thanks

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By wombat
28th Jan 2015 16:08

Use cash basis for sole traders

Hi

If the client is a sole trader and you calculate his profits on a cash basis, then no stock figure is needed. 

Don't forget to tick the relevant box on the tax return. 

 

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Replying to SteveHa:
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By [email protected]
29th Jan 2015 09:15

vatable turnover is more than 81k

wombat wrote:

Hi

If the client is a sole trader and you calculate his profits on a cash basis, then no stock figure is needed. 

Don't forget to tick the relevant box on the tax return. 

 

his vat turnover is more than £81k, and I guess accrual accounting is needed to record his transactions

 

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RLI
By lionofludesch
28th Jan 2015 16:09

Happens a lot

To be fair, one year's profit is next year's deduction and my experience is that HMRC are generally quite cool about it. 

However, I did have one spectacular suggestion at an enquiry, where the Inspector wanted an uplift of stock which would have been covered by personal allowances, only to be deducted at basic rate in the following year. 

Anyway - just do your best.  It won't be right but as long as you're reasonable happy with it, it'll be fine.

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RLI
By lionofludesch
28th Jan 2015 16:15

No

You only have to disclose estimates if they are provisional and you intend to amend them later.

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By BroadheadAccountants
28th Jan 2015 17:33

Reversing error

Would there be any comfort in any error reversing in a subsequent period?

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