Capital Allowances

Capital Allowances

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Hi

Just a quick one, 

A client has a company which ran at a loss in the first few years, no capital allowances were taken as they didnt want the loss to be greater than what it was, they are now in the position to take them.  As they were not taken in the tax years applicable, am i right in thinking i need to create a pool for them and multiplying by this years rate of 18% or am I able to deduct the whole 20k.  They are were all allowable for AIA in the tax year in which they were applicable to.

Thanks in advance.

Replies (8)

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By Paul D Utherone
07th Nov 2014 12:33

If you do not take AIA in the year of purchase

you cannot take it in a later. They will just have a balance brought forward as cost less CA's (Nil as disclaimed) and will claim at the relevant WDA rate for the period

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RLI
By lionofludesch
07th Nov 2014 12:45

Oh dear

Your client will have to wait around 12 years to use those capital allowances now.

Don't really understand the comment about the tax losses - isn't that what deferred taxation provisions/assets are all about ?

There are very few situations where it's not beneficial to claim AIA for a company.

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James Reeves
By James Reeves
07th Nov 2014 12:47

They should have taken them

They should have taken the AIA when it was available. This would then have generated a loss that could have been carried forward and used in full to offset current year profits. As they did not do so they will have to take it as WDA over a period of years. Poor planning.

If the assets were brought into the pool in the year of acquisition then you will have a balance b/fwd on which you can claim 18% (8% if special rate applies).

If the assets have not yet been pooled, bring them into the pool now at cost value and claim the WDA. Same result either way.

EDIT - beaten to it by Paul and lion.

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RLI
By lionofludesch
07th Nov 2014 12:51

What do you mean by .......?

What do you mean by "they didn't want the loss to be greater than it was" ?

Claiming Capital Allowances won't alter the loss. 

Though you may wish to disclose tax losses in the notes, if material.

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By A E Scott
07th Nov 2014 13:51

Thanks for the info.  I wasn

Thanks for the info.  I wasn't doing the accounts as the time and the previous accountant hadn't put any capital allowances through.  It obviously makes sense to claim all allowances during the year but unfortunately this did not happen.  Also companies do not want to be seen that they are making huge losses in case they need to borrow money from the bank etc.

I was thinking that the client may want to re-submit the ct600's but don't want this to trigger an investigation (for no reason other than they are a pain in the backside), if the client suggests this, can we go back 5 years?  There will not be any tax to pay as until this year there were losses b/f. So no interest charges, I just dont want HMRC to charge penalties for amended submissions or for any other reason they can think of!

If the only way is to add them to a pool and get the 18%, that is the way that we will do it.

Thanks again.

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Replying to Tim Vane:
RLI
By lionofludesch
07th Nov 2014 14:44

Same Loss

A E Scott wrote:

Also companies do not want to be seen that they are making huge losses in case they need to borrow money from the bank etc..

This is what I don't get - the accounting losses would be the same whether you claim AIA or not.

I accept that you weren't involved in this at the time but it's poor advice.

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Replying to whitevanman:
James Reeves
By James Reeves
08th Nov 2014 13:00

Poor advice

lionofludesch wrote:

I accept that you weren't involved in this at the time but it's poor advice.

Such poor advice that the OP's client may be advised to seek recompense from the previous accountant if the amounts involved are significant. This is basic stuff and the previous accountant does appear to have failed in his duty to the client.

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By User deleted
07th Nov 2014 14:55

Just to add one point

I agree with all points made above (though I can immediately think of  a couple of cases in recent years where company benefitted by not claiming full allowances of year of acquisition).

In answer to the OP's question about amending prior year returns, yes you can - but only those within the amendment window. In other words, you may be able to increase losses b/fwd a little by including WDA for a year or two, but you will not be able to go back and claim AIA if you're out of time to amend the return in question.

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