Closing stock: how to count and value your company’s stock at the year end, and what it does to Corporation Tax

What counts as your stock

Goods your company owns are its stock wherever they sit: in your own unit, at an Amazon fulfilment centre, at a third-party warehouse, or on a van to a customer who hasn’t received them yet^6,5. What matters is ownership, not where the goods are.

• Goods on their way to you count once they are yours under the terms you bought on, often when they are paid for and leave the supplier, even if they arrive after the year end. If you paid after the year end, the bill is one the company owed at the year end; on Fileyear that goes in “Bills for this year paid after the year end”.
• Goods held for someone else don’t count: stock on consignment, or a customer’s goods waiting to be collected.
• Packaging and samples you use rather than sell don’t count, unless they are significant.
• Damaged units are still yours until they are removed or disposed of, including units Amazon marks as customer-damaged or warehouse-damaged.

What “cost” means

Cost is what the company paid to get the goods: the supplier’s price plus the costs of acquiring them, such as shipping to the UK, import duty and the carriage into your store or warehouse¹. Trade discounts come off. If the company is VAT registered, the VAT it reclaims isn’t part of cost; if it isn’t registered, the VAT it paid is.

Storage, selling costs and administration aren’t costs of getting the goods, so they aren’t part of cost. For an online seller that means monthly warehouse or fulfilment storage fees, marketplace commission and advertising are this year’s costs, not part of the stock.

When goods are worth less than they cost

At every year end, check whether anything is worth less than it cost: damaged returns, an old season’s stock, products the market no longer pays for. For each of those, the value is what you could sell it for, less what it will cost to sell^1,3. The rest stays at cost.

Say you hold goods that cost £6,000, and £1,000 of them are damaged and will fetch £400 after fees. The stock is worth £6,000 − (£1,000 − £400) = £5,400, and the £600 difference is a cost of this year.

First in, first out, or average

When you’ve bought the same product at different prices, you need a rule for which price the unsold ones carry. Most sellers use first in, first out: the oldest goods are treated as sold first, so what’s left carries the most recent prices. A weighted average cost is the alternative¹. Company law also mentions last in, first out, but HMRC doesn’t accept it for tax and accounting standards don’t allow it, so in practice it isn’t used².

How stock changes your Corporation Tax

Cost of sales is stock at the start of the year, plus what you bought, less stock at the end. So stock you still hold at the year end lowers this year’s costs and raises profit, and Corporation Tax follows the accounts⁷. A year where stock grows has more profit than the bank alone suggests; a year where it shrinks has less.

Goods a director takes

Stock a director takes for themselves, family or friends without paying is treated, for tax, as sold at its market value^8,10. Fileyear records it as a sale to the director at the price the company sells it for, which the director then owes the company. If that isn’t repaid within nine months of the year end, it can cost the company s455 tax like any other director’s loan¹¹. See director’s loan accounts and s455.

When the company stops trading

There’s no “next year” for stock left when a trade stops. If it’s sold, the sale is in the figures. If a director takes it, it counts at market value. If it’s still held, it’s valued for tax at what it would fetch if sold on the open market at that time⁹, which can be more than it cost; Fileyear adds the difference to the taxable profit of the final period.

Getting the year-end count from your sales channel

None of the marketplaces tell you what your stock cost: they give you units, and you add each product’s cost from your purchase records or a cost list¹. Then add stock held anywhere else.

Amazon

Amazon’s inventory ledger keeps the balance for past dates, so you can read the year-end figure after the event. In Seller Central, open Reports, Fulfilment, Inventory Ledger, choose the summary view by day and pick your year end. It lists units per SKU, including damaged units and units moving between warehouses.

Shopify

Shopify’s inventory shows what you hold now, not on a past date. The simplest way is to export Products, Inventory for all locations on the year end itself, before the next day’s orders. Shopify’s “Cost per item” is often blank, so fill it in or add a cost list. If the year end has passed, a careful estimate from today’s figures is acceptable if it’s reasonably accurate⁴: start from today’s export, add back what you’ve sold since the year end, and take off what you’ve received since. Keep your workings.

TikTok Shop

In Seller Center, open Products, Manage products, and export on the year end date. The export lists each Seller SKU once per warehouse, including TikTok’s own fulfilment: add the warehouses together for each product, then multiply by what one unit cost you. If the date has passed, work back from a count or today’s figures in the same way as for Shopify⁴.

How Fileyear does it

On the year-end questions, drop your Amazon ledger download, Shopify or TikTok Shop export (or our template) and a cost list, or type what the goods cost in total. Fileyear asks which goods are worth less than they cost and what those would sell for, and works out the write-down. The review shows the stock value and any write-down in the figures before anything is filed.

See Fileyear for online sellers for the supported stock, payout and bookkeeping inputs.