I tend to deal with more traditional corporate businesses and therefore I'm hoping someone with more expertise may be able to help out. I have looked through the guidance but still find myself confused.
I have a clients son who runs a dog breeding business. He runs it out of his fathers premises, I have no concerns over the welfare of the animals or how they are treated. Having looked at it, it is definately a trading business and not a hobby. A lot of time searching for suitable breeding stock, often importing them from overseas at considerable cost and then breeding them for 3 litters before selling them on to create room for new stock. The breeding animals are not considered to be family pets, and none have been retained to date, all are sold on.
So far around £50k has been spent on the actual breeding animals. Whilst this is a business (fully licenced and registerd etc) profits were always minimal due to the level of costs associated. However with the price of puppies increasing, it is likely going forward that profits will be made. Therefore how should the cost of acquisition of the breeding animals be treated - they have always been ignored previously.
My research throws up treating it as stock potentially, or as capital asset or making a herd basis election. All rather confusing.
Has anyone come across this before?