How should the effective reduction in cost of a capital asset, brought about by vat registration, be reflected in the followining years accounts e.g
Cost y/e 31/03/02 200
+vat 35
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235
FYA claim 40% 94
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WDV cf 141
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During Y/E 31/03/03 register for vat, goods and hand at registration therfore reclaim the £35.00. How should this be shown the the Capital Allowances computations for the year ended 31/03/03?
DAVID
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Replies (3)
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VAT in CA comp
The VAT movement (which presumably could be in either direction over time with the Capital Goods scheme) should be treated as an addition to, or partial disposal of, the original asset, in the year the VAT adjustment occurs.
WDV b/fwd 141
VAT adj (35)
Bal 136
WDA 25% 34
WDV c/f 102
If in the next year you have an adjustment either way, do the same again. All adjustments will affect WDA's only, not eligible for FYA
FYAs
First year allowances may be claimable on any additional VAT by virtue of Section 236 CAA 2001, subject to anti-avoidance legislation at Sections 241 to 246.
See also the Capital Allowances Manual at paragraph 29230 for more details about your situation.
Hope this helps.
Michael...
If no VAT was claimed in the first instance, as the querist stated, so FYA was claimed on the full gross cost in year 1, I would not think there is any expenditure left on which FYA could be claimed in a later year?
I think your posting would be correct in a situation where in year 1 a partial VAT claim was made based on the CGS position, and the percentages later changed.
Do you agree?