A lady had a craft hobby which she has recently turned into a business. She has introduced stock into the business (approx £1k of craft materials and glass). As it was previously a hobby she never kept receipts. Other than trying to get copies of receipts what else can be done?
You'd just have to do your best estimates. When you say hobby that could mean that there was no profit made and so nothing is reportable to HMRC. To answer your question with a question, then is to ask 'what needs to be done'.
Depending what this hobby is, it could well be that there were losses. I take it that in order to turn this into a trade, she is creating and selling things. The process of starting the hobby, could well be regarded as laying the foundations of the business.
However, to register it as a business from several years ago would lay open the possibilities of late filing penalties - unfairly in my book.
Stock must be valued at the lower of cost or net realisable value unless that conflicts with the requirement to show a true and fair view of the business. To show a true and fair view the stock must be valued at market value. My understanding of market value is to ask "what would it cost to buy the stock in the current market?"
Link here. http://www.hmrc.gov.uk/manuals/bimmanual/BIM33160.htm (you will have to copy and paste the link into your browser).
Hope that helps,
David.
-- Edited by David Ballantyne on Saturday 5th of July 2014 12:34:33 AM
There shouldn't be any problem with previous activity as far as HMRC are concerned.
Income from hobbies are not reportable, if the intention was not to create profit. There are various BIM articles on HMRC website discussing trade vs hobby.
In fact some (working) tax credits will not be allowed if it is decided that the activity does not generate enough income to be classed as business.
I would agree that a fair valuation of the stock should suffice. Perhaps using the current supplier catalogues, or website
