Balancing allowance on a special rate pool

If a balancing allowance isn't needed in the year of disposal, is it lost?

Didn't find your answer?

Hi,

If there is a seperate pool for a Van (due to a private element being deducted) and this van is disposed of, leaving a balancing allowance available for 2017/18 that isn't needed, is that allowance of say £3,000 lost? 

I can't find anything that confirms it is lost or available to carry forward.

Of course if the van was in the main pool, the disposal value would be deducted from the pool balance and any residual value would be c/fwd and made available for WDA even though the asset has been sold/scrapped.

Seeems unfair that just because it has been seperated from the main pool, that the allowance can't be utilised in future years.

 

Replies (21)

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By johngroganjga
20th Sep 2018 13:13

Isn't it just part of the loss for the year?

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JCACE
By jcace
20th Sep 2018 13:27

The van would be in a single asset pool, so on disposal, a balancing allowance or charge will arise.
Where this results in lost relief due to, say, low profits, as far as I can see that's an unfortunate downside.
https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca27005

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By Fartch3
20th Sep 2018 13:31

The balancing allowance wouldn't create a loss. It would just reduce their non taxable profits.

The more I think about it, the more I can't see how the allowance would just be lost.

Just because it is analysed in it's own pool due to having a private element surely can't mean the balancing allowance that has arisen can't be used in future years.

Surely I could transfer the business element of the balancing allowance (50% of £3000) to the main pool?!

Seems logical

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Replying to Fartch3:
By johngroganjga
20th Sep 2018 15:17

Fartch3 wrote:

The balancing allowance wouldn't create a loss. It would just reduce their non taxable profits.

But there is clearly no profit here, hence the OP’s question.

Why doesn’t the allowance just augment the loss?

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Replying to johngroganjga:
Portia profile image
By Portia Nina Levin
20th Sep 2018 15:20

That is the OP John. It is the OP!

The taxable profits are below the personal allowance, the balancing allowance will reduce those profits to sit even more comfortably within the personal allowance.

I know you struggle with this tax stuff, but please do try and keep up.

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Replying to johngroganjga:
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By Matrix
20th Sep 2018 15:20

I assume the reason for the question is that the profit is already under the personal allowance.

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Replying to Matrix:
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By Fartch3
20th Sep 2018 15:36

Apologies for being unclear, but that is right. the only "benefit" would be taking the client under the class 2 threshold.

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Replying to Fartch3:
By Ruddles
20th Sep 2018 15:43

Fartch3 wrote:

Just because it is analysed in it's own pool due to having a private element surely can't mean the balancing allowance that has arisen can't be used in future years.

Yes it does - read the legislation
Fartch3 wrote:

Surely I could transfer the business element of the balancing allowance (50% of £3000) to the main pool?!

No you can't - read the legislation
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By kenny achampong
20th Sep 2018 13:31

I had the same thing recently for a sole trader that scrapped their car and didnt replace it. I couldnt find any examples/advice at all, and so am just carrying forward the WDV and will be claiming WDAs for evermore even though is no vehicle.

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Replying to kenny achampong:
By Ruddles
20th Sep 2018 15:38

Well, if the car was in a single-asset pool because of private use, that treatment would be just plain wrong. Is that enough advice for you?

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Replying to Ruddles:
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By Fartch3
20th Sep 2018 15:44

Any chance you could back this up please?

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Replying to Fartch3:
By Ruddles
20th Sep 2018 15:46

For the third time, read the legislation

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Replying to Ruddles:
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By Fartch3
20th Sep 2018 16:26

Helpful!
I think I will voice my opinion in this way on every thread and just state "Read the legislation"

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Replying to Fartch3:
By Ruddles
20th Sep 2018 16:31

Well, if you can't be a**ed to do so ...

It's not as if it's a particularly challenging issue, involving some obscure piece of legislation. It's all rather basic stuff - and I find that in such cases if you make the effort to go and find the answer yourself it's more likely to stick in the grey matter for the next time that the issue arises.

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Replying to Fartch3:
Portia profile image
By Portia Nina Levin
20th Sep 2018 16:31

To be fair, it is customary for adults to wipe their own ar5es.

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Replying to Ruddles:
By kenny achampong
26th Sep 2018 14:45

I guess it's a bit of advice, which is better than no advice at all so thanks for that. I presumed that they reduced the WDA to 18% and 8% to encourage low emission emission cars, but in fact you can still claim the whole cost of the car (subject to private use), it just delays most of the claim to when its disposed of, when there will just be a bigger balancing allowance. What a load of needless complication for no reason. Or am I still missing something, because it just seems a bit daft ?

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By thomas34
20th Sep 2018 13:45

Agree with jcace. The only tax planning available is to either claim partial AIAs (and carry forward the unused bit for WDA use) or reduce your WDA claim to suit. I don't think you can rewrite history by changing a date of disposal. So yes it's an unfortunate combination of circumstances as far as CAs are concerned.

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Quack
By Constantly Confused
26th Sep 2018 15:44

I had profits of £11,500 on my business but then I spent £11,500 on repairing all my equipment and painting the walls. I will therefore obviously treat it as having happened in a completely different tax year as I don't like the tax rules!

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Replying to Constantly Confused:
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By Fartch3
26th Sep 2018 20:22

What I was saying isn’t far off the fact we dispose of an asset in the main pool and continue to have a tax benefit in years to come.

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Replying to Fartch3:
RLI
By lionofludesch
27th Sep 2018 08:37

Saying it doesn't make it happen, though.

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By Tax Dragon
27th Sep 2018 06:51

It's true that there are various ways that the legislators could have chosen to deal with this situation. The one they opted for was the simplest and most obvious - an immediate (balancing) allowance. What you are asking for is an election for an alternative (in your case more beneficial) treatment. It's clear that none of the respondents knows of such an election - so you will be one up on them if you can show that such an election exists. That's your challenge - but if you can't find it then you are stuck with a balancing allowance, because that's the rule.

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