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Clawback of AIA

Is there a mechanism to clawback capital allowances when the business use of an asset falls after it has already received 100% AIA?

Imagine that a sole trader purchases a van purchased on day 1 that is 100% business use and that the full cost is covered by the AIA. In year 2, business use falls to 50% and at the end of year 2, the van is scrapped.

It seems to me that the trader should be entitled to only 75% (average use over the van's life) of the van's cost, but has already received 100% in year 1.

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Giles Mooney

answered this question for me at a lecture he was giving on Capital Allowances.  His answer was that the vehicle comes out of the pool at market value at the date it stops being wholly for business use.  In the scenario I had where children are employed by a family partnership, go off to university and then then return to work, all the time having use of a car owned by the partnership, I would have AIAs on the vehicle day one.  Balancing charge on the child leaving employment.  The car then goes back into the pool when the child returns to work.

The words okey cokey spring to mind!

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Paula

Are you saying therefore that the pool should show disposal proceeds of the market value of the asset (in year 2) thereby possibly creating a balancing charge and a separate pool set up with a purchase cost of the same value?

Seems logical.

 

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Thomas

Correct

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Thank you Paula...

...and also to thomas34 for asking what was also going through my mind.

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