How stock affects your company’s Corporation Tax

A worked example

A company starts the year with £4,000 of stock, buys £9,000 of goods, sells £20,000, and ends with goods that cost £6,000. Its cost of sales is £4,000 + £9,000 − £6,000 = £7,000, so its profit is £13,000. Ignoring the closing stock would show a profit of £7,000, and £1,140 less Corporation Tax at 19%, which HMRC would later want.

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^2,4. 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 loan⁵. 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 time³, which can be more than it cost; Fileyear adds the difference to the taxable profit of the final period.

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