Capital allowances - fixed assets - additions not recorded in pior years
My client has belatedly performed an exercise to "tidy up" an inherited messy fixed asset register. The net effect is that substantially more assets have been identified. In this year's accounts the fixed assets additions figure disclosed in the fixed asset note comprises this years actual additions and an adjusting amount to bring the accounts into line with the register. The question is whether I have any basis for claiming allowances on the "adjusting" figure. I'd welcome any thoughts>
Proof
You will need to be able to prove, (through invoice) that these additional assets were actually purchased by the business. The assets should then be separated into accounting periods.
For any asset addition relating to a period beyond those in date you have merely waived the allowances in the earlier periods. It will qualify for WDA at the relevant rates within open periods. It will depend on the quantum involved whether it is worth amending the previous return to reflect additions for that period, AIA and extra WDA would also apply. If the quantum is small I would merely treat that portion of the adjusted additions as not qualifying as AIA expenditure and claim allowances going forwards.
Thanks for responses - I'm
Thanks for responses - I'm most grateful.
If I understand you Marion then for bona fide pre-current year additions we can claim WDA in this year - is that correct? The amounts involved are significant, but I suspect that the client would prefer not to disturb earlier year returns even if there is a cash flow benefit from doing so. There is only plant and machinery to consider - no industrial buildings or other qualifying expenditure.
I'm not involved in the accounts prep for this company and don't fully understand the adjustments that have been made. I'm trying to gather more information. For historical reasons (a company was bought from an overseas parent who had been lax with their accounting for a UK company). At this stage I just want to understand whether, if we can identify plant and machinery expenditure that hasn't been claimed for in previous years (and not claimed as revenue expenditure) we can claim allowances.
Yes 1 thanks
As long as you can show that it was real expenditure, incurred by the business you are now dealing with, then effectively you have waived any claim in earlier years but you can claim wda going forwards, but not AIA or FYA.
If these assets are part of the purchase from the overseas company then it may not be that simple. If an election was made for the assets to transfer at WDV for tax purposes between the connected parties I do not think you will be able to claim any additions now.
What if you find the extra
What if you find the extra additions in the course adjustments in a back duty case and in due course a discovery assessment is raised for the yeare concerned. Can you then make a capital allowance claim ( including FYA ) for that year?
Back Duty is different
If the information came to light during a back duty case I would make the maximum claims possible during the course of the investigation so that when the assessment was issued they would have to make the additional allowances in reaching their figures of tax lost in order to minimise any interest and penalties.
As the year was being reopened I would also claim FYA or AIA as if I was making the claim in date.
Where did the assets come from
Were these additional items assets that had been charged to repairs in the past?
Perhaps they were self manufactured?
When you went Dr fixed asset additions where did you put the Cr?