First year of trading and client wasn't VAT registered so annual investment allowance was claimed on the full cost of the assets. This year the company went VAT registered so have gone back and reclaimed VAT on these assets. I have done a manual computation and used the VAT value as disposal from the pool (there is a pool value), however I can't see how to do this on my software (PTP) which I am emailing them about. I just wanted to make sure that I have treated things correctly in the manual computation?
Please be gentle, it's the first time this has come up for me.
Replies (12)
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Can't be that hard
It can't be that hard to plug in a disposal to your Capital Allowances calculation.
It's an everyday occurrence.
Other treatment
I concur with the first answer above - that is what I have done several times in the past - show the VAT recovery as proceeds in the Capital Allowances Pool.
Interestingly I saw a similar query recently on Aweb and some respondents instead advised to treat the VAT refund on assets as a credit to P&L.
So, it goes to show that asking for second opinion is fair, as there quite likely will be a second opinion.
Incorrect
Interestingly I saw a similar query recently on Aweb and some respondents instead advised to treat the VAT refund on assets as a credit to P&L.
That would be quite incorrect and may lead to an accelerated tax charge.
Wrong answer or not
The justification for writing off to P&L is based on the old FRS5 principle that where there is an adjustment to VAT in particular, any asset cost in fact, it is permissable from an accounting and tax perspective to write off to P&L where it is not practicable or material to adjust the asset account in question - this becomes particularly relevant where the Capital Goods rules require quite minor adjustments to VAT recovery for up to 10 years. I assume that the rules would be similar under FRS102/105 etc.