Used Car Dealer

I think I know the answer but wouldnt mind a second opinion. I appreciate any replys as I know this is a busy time for us all.

I have a new client who sells used cars. I have calculated the profits at £27,000 after adjusting for stock of £23,000. However, the client does not accept that he has made £27k profit and does not understand the concept of stock.

Is it possible to do this business on an income and expenditure basis and therefore remove stock leaving a £4k profit?

I am reasonably confident the answer is no but would welcome any comments.

Cheers Ste

Comments

  • stevo5678
    stevo5678 Registered Posts: 325
    Hi groundy,

    I would say definetly no as you state. I don't think there is any argument.

    Just tell the client you understand that he has paid the money out for the stock but it has no impact on the tax (IE he can't reduce his profits if they are still held in stock). Tell him that you don't make the rules!

    The only possiblilty is to reduce the stock, which is maniplulation but if the client states in writing that the stock value is lower then who are you to argue...

    I would'nt recommend doing this obviously, but I'm sure it happens...

    Cheers

    Stevo
  • Dean
    Dean Registered Posts: 646
    Have you calculated the profits correctly?

    That seems an odd question to ask I know but I have come unstuck with this before and it turned out to be the the client's records. They weren't recording part-exchange correctly - effectively, additional direct costs.

    Regards

    Dean
  • groundy
    groundy Registered Posts: 495
    Stevo/Dean

    Thanks for the replies.

    Dean the £27k stated was from his own workings, he has now agreed to pay us to prepare his accounts fully rather than going from his calculations. So hopefully I will prepare them correctly :001_smile:

    No part ex to worry about cars are of such low value that not worth taking a part ex!
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