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The process of ascertaining cost is primarily a matter of identification. In some cases physical identification is possible. This is the position where articles are sold in the same condition as that in which they are bought, where each article is identifiable and distinguishable from the rest and where records can be kept showing the actual cost of each article bought (eg a dealer in land or buildings). See below as regards dealers in motor cars.

It is necessary to remember that 'cost' is not synonymous with price. Other items of expenditure, such as freight or warehouse charges, or insurance, may need to be added to the price in some cases¹. HMRC interprets² cost as meaning the total historical cost of bringing the relevant stock to its existing condition and location. If it cannot be ascertained precisely, then the closest approximation should be made.

In some cases, no physical identification is possible. This applies particularly where sales are made from a stock which is replenished by purchases at intervals and at varying prices, each separate