Is 'Growth' taxable?

[drainbrain]

If I borrow money and buy stock which I sell at a profit which I plough back along with more borrowings into more stock and continue the process, is tax payable on the profit during the plough back period or is it only payable when the plough back eventually ceases and profit is realised/crystallises?

If it's payable along the way is it then payable again on crystallisation?

[Eric Mc]

The tax charged on the profits made through capital growth is called Capital Gains Tax. In some cases, but not all, if the capital gain is re-invested immediately - usually into a similar type of asset - the gain will escape tax through "Rollover Relief". If the asset is finally disposed of and not reinvested, the Capital Gains Tax may become payable.

[drainbrain]

Thanks for that.

[sumo69]

I think the OP needs to add a bit of explanation as to what he means by "stock" - if its physical buying/selling of goods and then restocking, then its an Income Tax/Class 4 NIC or Corporation Tax issue as these will be trading profits.

David

[keith333]

If you make a profit selling your stock, then its entirely up to you what you do with it e.g pay yourself, re-invest in more stock. Profits are taxable though and as you trade throughout the year it would be sensible to put money aside to cover any tax liability.

If you re-invest all your profits into stock and fail to sell it by the time you have a tax liability that is due, HMRC will expect payment.

[Mr Overheads]

OP is the example below what you mean?

Borrow Cost Sell Price
Start 100 100 150
Month 1 50 200 300
Month 2 50 350 525
Totals 200 650 975
Profit 325
Tax @ 20% 65

So you borrow £100 and buy £100 of Goods, you sell those Goods for £150 so have £150 of cash available, you borrow another £50 so have £200 cash, you buy therefore £200 of stock and sell for £300. You repeat by borrowing another £50 buying £350 of stock sell for £525.

So total Turnover is £975, the stock cost you £650 and assuming no other costs and the borrowing was at 0% interest, your profit was £325 of the £525 you now have in the bank. If CT is 20% then you owe HMRC £65. So put that aside and reinvest the £460 in more stock. etc etc.