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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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
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.
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.
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.
Same Loss
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.
Poor advice
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.
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.