mrshamilton
Blogger
Share this content
0
944

Capital allowances and VAT reclaimed on assets

Capital allowances and VAT reclaimed on assets

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

Please login or register to join the discussion.

avatar
By JimFerd
29th Feb 2016 09:38
Thanks (2)
29th Feb 2016 10:07

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.

Thanks (0)
avatar
29th Feb 2016 11:12

thank you lionofludesch I didn't want to put it into disposal proceeds as then it will not be there for if they actually do dispose of it in full.  I guess it's a kind of part disposal but if I put those proceeds in it will get rid of the asset.

I will do that if I find no other way of dealing with it

Thanks (0)
avatar
By DMGbus
29th Feb 2016 10:30

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.

Thanks (0)
29th Feb 2016 10:44

Incorrect

DMGbus wrote:

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.

Thanks (0)
avatar
By DMGbus
29th Feb 2016 10:56

Agreed

lionofludesch wrote:

DMGbus wrote:

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.

Agreed not the best way to deal with the VAT refubnd, but several Aweb members said otherwise and failed to challenge this arguably "wrong" answer.

Thanks (0)
01st Mar 2016 13:04

No choice

It is disposal proceeds, albeit a part disposal.

There are no other options.

Thanks (1)
avatar
01st Mar 2016 13:13

I agree

lionofludesch wrote:

It is disposal proceeds, albeit a part disposal.

There are no other options.

 

I understand what you mean, I am trying to put it in as disposal proceeds but without getting rid of the asset, I've been shown the workaround for it now

Thanks (0)
avatar
01st Mar 2016 13:12

PTP have contacted me and it's been done thank you for all the reassurance that manually I was doing it correctly

Thanks (0)
01st Mar 2016 13:57

Single Asset

You said there was a pool.

Is it a single asset ?

Thanks (0)
avatar
03rd Mar 2016 09:00

There were several assets purchased during the first year which had AIA claimed on them and tools introduced to the business which just had WDA's claimed, the pool value is the tax wdv brought forward of these tools

 

Thanks (0)
03rd Mar 2016 09:14

So I don't see what you mean about "getting rid of the asset".  

But it's not important.

Thanks (0)
avatar
03rd Mar 2016 09:16

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.

Thanks (0)
Share this content