Client is to cease to trade and transfer business to Ltd company. Normal year end is June but a large capital purchase has been made and doesn't want to lose AIA. 40% tax payer. Considering shotened accounting period to March 2011 and then ceasing business in early 2011/12. If this is done is this calculation correct? Is it likely to be challenged by HMRC? Thanks in advance.
Shortened accounting period:
Pool
b/f 60000
additions 70000
total 135000
aia 70000 ( max AIA 100k x 9/12= 75000)
wda 9000 (20%x9/12)
c/f 56000
Period of cessation:
Pool
b/f 56000
transfer at twdv 56000
Replies (5)
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Andrew Scott
Have you changed the accounting date before? Provided you have not I cannot see anything wrong with the proposed planning. Does the change also release any overlap profit?
Red rags and bulls
I can see a problem with your plan. For a change in accounting date to be effective, not only must you not have changed it in the previous 5 years, but the change must also have been made for commercial reasons.
Shortening to 31 March, claiming AIA, and then ceasing shortly after might be inflammatory.
I think you should read Ss. 217-218 ITTOIA 2005 for yourself and imagine Dirty Harry asking if "you feel lucky".
http://www.legislation.gov.uk/ukpga/2005/5/section/217
http://www.legislation.gov.uk/ukpga/2005/5/section/218
The alternative is to wait until July to incorporate. Personally, that's the option I'd go for.
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Cirius, if you read the legislation it says that condition A or B should be met. It does not also have to be made for commercial purposes.
I would have no hesitation in doing what the OP suggests.
Why do you suggest that waiting till July make a difference?
lol, agreed!
I'd just been looking at the section in a different context and thought "ooh, I never realised that!". Thanks for clearing up my misread. Plan A sounds fine lol.
Consider AIA anti avoidance provisions
s218ACAA2001 prohibits the AIA being made if the arrangements could be regarded as being made if the "main purpose, or one of their main purposes, is to enable a person to obtain an annual investment allowance to which the person would not otherwise be entitled"