The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:
In this guidance note, references to ITTOIA 2005 relate to the rules applicable to individuals and references to CTA 2009 relate to the rules applicable to companies.
How stock should be valued on a cessation or transfer of trade is dictated by ITTOIA 2005, s 173 for income tax and CTA 2009, s 162 for corporation tax purposes. If the accounts valuation is different from the statutory valuation, a tax adjustment must be made.
The valuation of stock depends on the identity of the buyer. The buyer could be:
CTA 2009, ss 164–167; ITTOIA 2005, ss 175–178
If stock on cessation or transfer of trade is being sold to somebody who is not a trader or who is not a UK trader, the stock must be valued for tax purposes at its market value.
HMRC sees this as the last opportunity to tax the stock because once it has left the UK tax net, HMRC is unlikely to get the opportunity to tax the stock again. The stock could be going to a foreign party or it could be going to a UK individual for their own personal consumption. Consequently, HMRC uplifts the price of the stock to its market value at the date of transfer.
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