Stock Valuation for Own Goods Introduced Into a New Business

I've looked extensively through the BIM and searched online forums, but still cannot seem to find a definitive answer to my question: If stock is introduced into a new business that has been either: inherited, or comes from items which have previously been owned for many years, is this stock recorded in the accounts? If so, how? Is it valued at zero (because it hasn't cost anything), or at today's market value? And who decides the market value? It seems as though opinions on this topic vary. Looking at BIM33630 - Stock: non-trading transactions in stock: ‘own goods’, the guidance seems to focus more on disposal of stock, or taking goods for your own use. But perhaps I've missed something? If stock is introduced into the business, and it has to be recorded as an expense at today's market value, how would HMRC expect this to be recorded, given that there would be no actual financial transaction to back this up? I just want to ensure that all paperwork meets HMRC's expectations! The business will a non-limited, non-VAT registered partnership, using cash basis. We will, of course, be registering the partnership, submitting our own self-assessments and sending a partnership tax return. Many thanks for any help.

Hi,
Please refer to: BIM33310 - Stock: trading transactions in: ways of disposing of or acquiring stock.
Thank you.

Hi Many thanks for your response. I have read through all of the pages relating to the link provided, as well as the associated links, and unfortunately I still cannot really find the answers to my questions. The guidelines seem very much biased towards B2B movement of stock and disposal of stock. I cannot find any specific mention of how to account for using one's own goods to start a business.

I have exactly the same query. I have a large collection that I have accumulated over the last 40+ years, and have got to the stage where I think I need to dispose of it - partly because of a large down-sizing in where I am going to live, and partly because no-one else will appreciate what is in the collection and I'm not getting any younger.... So my idea is to set up a business to sell the items, mainly online, through my own website and through an online marketplace. But I cannot work out how to value the "stock". If I put in a nil value then all my sales are profit, if I put in a current market value then I make no profit. It's a personal collection amassed for pleasure - some things have increased in value, some have decreased as they have fallen out of fashion, some have stayed about the same over a long period. There are thousands of items and I may have random receipts for a few dozen items. Is it possible to agree that it gets valued at a percentage of market value? So if an item sells for, say, £100, then we presume it cost 50% (or 40 or 60) of that, and business profits are calculated in the usual way. If I were to sell all the items to dealers I would only see a low percentage of their true value AND there would be Capital Gains Tax to pay on the proceeds. I'm happy to sell them myself to get best value (I've been justifying to my wife for decades that this collection is my pension fund!) and happy to pay tax in the normal way, but the stumbling block is how the initial valuation is done. Sorry to tag this on to someone else's post as a further query, but it sounds like a very similar situation.

You're right @taruffi, your situation sounds very similar, in that you wish to introduce your 'own goods' into a new business. I'm glad that I'm not the only one with this query!

Hi ,
 

Please have a look at the guidance for capital gains tax on personal possession, which includes possessions that are part of a set.  See :    Capital Gains Tax on personal possessions  . Thank you .

So is the suggestion that if I transfer all of my collection into a business to sell them, then the transfer is deemed to be at current market value, and whatever that value is, if it is over the CGT allowance, then I am liable to pay CGT. Any sales that I then make (at market value) don't have any element of profit so the business doesn't have to pay any tax, but all the costs associated with running the business would have to be paid by myself because there is no profit to offset them against. And for CGT, if I have no receipt for the item, then I pay based on the full amount I sell it for? As an eighteen-year-old when I started collecting I certainly wasn't recording amounts and getting receipts, and I still have the first thing I bought over 40 years later.

Hi Banjo,
The correct way of computing trading profits for tax purposes was to bring in opening stock and closing stock into the computation at the lower of cost or market value (the modern rule being the lower of cost and net realisable value) as advised at BIM33110:
BIM33110 - Stock: valuation: tax treatment of trading stock
You will need to determine the value of the opening stock you bring into the business.
Thank you

Hi HMRC Admin 34 Many thanks for the information and link, I will take a look. Just one other quick question, do I have to show any proof of how I have determined the value of the opening stock? Obviously, there will be no receipts or invoices to back this up. Thanks once again!

Hi taruffi,
It sounds like you are planning to sell his personal possessions you have collected over the years. 
Personal possessions and Capital Gains Tax 2024 (HS293)
If what you are doing amounts to trading as a business then it could be an income tax situation but you would need to see if the badges of trade are met.
Business Income Manual BIM20200 - Meaning of trade: badges of trade
Thank you.

Hi,
You would give details in the comments section to show this.
Thank you.