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Tangible assets not depricated year on year

Hello

I have a new client who has asked me to complete their Corporation Tax Return. Following a request to previous account they have sent over to me the tangible assets data from previous years but as far as I can see they have never deprecated this tangible asset (company van and trailer).

The van and trailer were bought for £31k four years ago and were recorded in last year’s balance sheet as £31k, they were deposited of in this financial year for £16k. I plan to compete the following entries but have you any other suggestions of how I can account for this as a £15k expense in the P&L will mean that this company will not make a profit in this financial year.

Dr Bank £16k

Cr FA Vehicle disposals £16k

Dr Expenses deprecation £15k

Cr FA deprecation disposals £15k

Thank you for your help in advance.

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19th Mar 2012 14:33

Eh?

My journals would be:

Dr B/S Bank £16K

Cr B/S FA Vehicle cost £31K

Dr P&L Loss on disposal of FA £15K

However, what have the accounting entries got to do with the Corporation Tax Return?  The only entry you need for CT is to deduct £16K from the balance brought forward on the main pool of capital allowances.  If that results in a negative balance on the pool, you have a (taxable) balancing charge of that balance.  Otherwise, you claim WDA on the reduced positive balance of the pool.

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19th Mar 2012 15:18

Only had a quick read but starting point must be that depreciation is not an allowable expense for CT.  The depreciation is bookkeeping although users of the accounts will have given a misleadingly high profit.

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By SJRUK
19th Mar 2012 16:48

Loss this year but inflated profit previous years

I would post as Euan's journal.

There may well be a trading loss this year but this adjusts for the over-inflated trading profits in the previous years.

And for tax purposes the situation is as per Euan indicates. Hopefully capital allowances have been claimed on these items.

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20th Mar 2012 10:26

Thank you for your relies, apologies this is the first time I have posted on here and I think I may have mislead you in regards to CT and deprecation.

Yes the previous accountant did claim capital allowances.

I will post as Euan's journal and explain to the client that the trading loss this year is due to over inflated profits in previous years.

Once again thank you for your help.

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