Ongoing trade?

Ongoing trade?

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Client formerly operated from shop premises selling wedding dresses, but was unable to make any profits from doing so. They have now ceased using the shop (in the 2013/14 tax year), but still have the stock of wedding dresses to hand. They are continuing to try to sell this stock online, though without a great deal of success to date. The fact that these were the demonstration dresses may be a factor in this. They are currently exploring other avenues which they hope will prove more fruitful. This business has unused losses.

The client started a new retail trade in a completely unrelated field when the previous one ceased. As well as being in a different field, this new business is operated from different premises as well. This is proving much more successful, so there will be an ongoing requirement to submit returns anyway. My thoughts are that, since they are still trying to sell the dresses, the other trade could be considered ongoing. That would allow me to preserve the losses that would otherwise be lost on cessation of trade, though only for use against any income from selling the dresses. Can anyone see any problems with treating the trade as ongoing? If so, can anyone think of any other ways of handling this.

Replies (5)

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By zebaa
24th Jan 2015 10:35

Ongoing

I too think ongoing. It is just the 'shop' (street side to online) has changed.

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Euan's picture
By Euan MacLennan
24th Jan 2015 12:35

Agreed

I agree that the wedding dress trade is ongoing until such time as the client stops trying to sell online (or at a car boot sale, etc.).  Was the cost of the demo dresses written off to P&L at the time, rather than carried forward as a fixed asset or stock?  If not, there will presumably be very little profit on the eventual sale, so carrying forward unused losses would be of little benefit.

Looks like you will have to complete two sets of self-employment pages until the client finally accepts that weddings have gone out of fashion!

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Stepurhan
By stepurhan
25th Jan 2015 07:59

The stock question

As it stands, the figures I'm looking at write-off the cost of the stock in question entirely. This is on the basis that they haven't sold them to date (over 12 months later) so the net realisable value can justifiably be said to be nil.

This is, of course, a matter of judgement. If a stock value were to be carried forward that was closer to the cost (about £25k) then future sales could create losses that would offset against other income in that year. I think that a mark-down has to be done, as they are clearly not selling (some have been put on eBay at cost price) but is there any justification for carrying a stock value forward.

Alternatively, should I just stop thinking about this given the client only brought in the records and their tales of woe this month.

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Replying to scrasey:
Euan's picture
By Euan MacLennan
25th Jan 2015 11:25

Yes

stepurhan wrote:

Alternatively, should I just stop thinking about this given the client only brought in the records and their tales of woe this month.

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By ann domonkos
25th Jan 2015 09:41

I would say it is ongoing as well ,i am looking at something similar  thinking of converting to the cash basis so i can get the relief this year for the stock brought forward as well as purchased this year.

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