corporation tax on stock????

[nick.cheshire.1990]

Hi Everyone!

Little bit of advice please, i'm looking at going into business with my father. He has run a small independent punk shop/online store for a number of years, he has always kept it as a "sole trader" set up.

Now im looking at coming on board, he doesn't want to keep to the "sole trader" set up as he is in the 40% tax bracket. i have suggested becoming a limited company (i already am a director of another) however my father is concerned that you will still have to pay corporation tax on stock....

His concern is, if we have made £10,000 profit, then instead of taking this out of the company, we reinvest it into new stock, more lines of stock etc so the remaining profit is £1000. do we pay the corporation tax for the £10,000 or just the £1,000?

as a limited company the best way to go with this or could you advice an alternative method instead of being stung with the 40%?

[pawncob]

Normal accounting rules apply. Stock in hand is deducted from purchases to obtain total deductible cost.