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Annual Investment Allowance (AIA) and Selling an Asset

Hi,

I've got a couple of examples and a few questions, if any one can answer them it would be a great help. Thank you.

Example A: I filled in my first self-assessment tax return last year (2009/2010) and had an Annual Investment Allowance (AIA) of £500 for a computer. This tax year (2010/2011) I sold the computer for £300.

Question 1: Do I put the £300 down as a Capital Allowance this tax year? And put the difference of £200 as a Balancing Charge?

Question 2: Does any Balancing Charge add to my taxable income?

Question 3: How do I go about invoicing this? Do I invoice regularly as a sales invoice or do I need to draw up an Asset Purchase Agreement (I read about that somewhere!)?


Example B:
I filled in my first self-assessment tax return last year (2009/2010) and had an Annual Investment Allowance (AIA) of £100 for a hard drive. This tax year (2010/2011) the hard drive broke and went in the bin.

Question 1: Do I put a Balancing Charge of £100 down for this tax year?

Thank you.

Replies

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By ACDWebb
08th Mar 2011 15:38

'

Example A: Question 1: Do I put the £300 down as a Capital Allowance this tax year? And put the difference of £200 as a Balancing Charge?

No. Why would you get £300 relief for money you have received for the computer when you sold it. You have a Balancing Charge of £300 - the proceeds - because you claimed AIA on the full cost last year and have a Nil pool brought forward

Question 2: Does any Balancing Charge add to my taxable income? Effectively, yes

Example B: I filled in my first self-assessment tax return last year (2009/2010) and had an Annual Investment Allowance (AIA) of £100 for a hard drive. This tax year (2010/2011) the hard drive broke and went in the bin.

Question 1: Do I put a Balancing Charge of £100 down for this tax year? No. Again you had the relief last year, but surely if the drive was less than a year old you got in touch with the vendor and got a replacement? I had problems with a drive that was nearly 3 years old and that was replaced under warranty

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By Anonymous
08th Mar 2011 16:36

Thanks for your reply again. I think I worked out all this from the other question you helped me with. I was reading a lot of online documentation on it and it seemed I should carry things forward but after your explanations I can see that I would only carry amounts forward if I didn't claim AIA against it and instead claimed 20% WDV.

They are just all examples. My hard drive is actually fine, and yes I would go to the vendor if it broke down so quickly!

The only thing I'm not sure about is how I would invoice a sale of an asset?

Thank you.

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By ACDWebb
09th Mar 2011 10:38

If you are VAT registered

you are going to need to raise an invoice to deal with the VAT on the sale. When you get to your Income Tax return the receipt will be adjusted out as a capital receipt that will be dealt with through the Capital Allowances / Balancing Charge

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By Anonymous
09th Mar 2011 14:00

Not VAT registered

No I'm not VAT registered. I only turn over < £2,500.

So do I still need to raise an invoice and then add the sale amount to the Balancing Charge?

Thanks.

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By ACDWebb
09th Mar 2011 14:26

You probably should to maintain the trail

Just make sure that you do not end up double counting the receipt for tax, once in the tax adjusted profit and again in the capital allowances

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By Anonymous
10th Mar 2011 13:03

Thank you

Thanks very much. I think I may need to sell next tax year so it's handy to know what to do.

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