Claiming Capital Allowances

Claiming Capital Allowances

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A client needs his taxable profit figure for a mortgage application.

There is AIA to claim in the year.

Without the AIA the profit is in excess of £40000

Is it mandatory to claim the AIA and are we ethically bound to do so even if the client is willing to pay the tax due on the £40000 profit.

Replies (5)

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By User deleted
20th May 2015 10:40

Same as any other allowances

Relief is given only if you claim AIA. So if you don't claim ...

Personally, I would not claim, submit the mortgage application form, and make a subsequent amendment to the tax return. If mortgage lenders insist on looking at tax-adjusted figures, rather than the commercial reality, that course of action wouldn't bother me at all.

Alternatively, if you could persuade the lender to look at the tax-adjusted profits before a claim to allowances (explaining that capital allowances are a pure tax adjustment) ...

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By Tim Vane
20th May 2015 10:42

Agree with BKD

I agree 100% with BKD and was about to write the same until I saw his reply.

Totally ethical, since it's just presenting the correct figures in a way that the mortgage companies will understand.

Mortgage lenders are pathetic.

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By Craigie_Bhoy
20th May 2015 12:40

Agree with above

I had a similar situation a year or so back where the taxable profit was almost wiped out by a large AIA claim.

It was a very hard slog to get the mortgage lender to understand, let alone agree to funding, despite previous years and projections.  The above method should remove that difficulty. 

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By possep
20th May 2015 12:54

AIA

The mortgage company would no doubt require the SA302 and it seems from other posts that these can now be printed from the SA record. It would possibly depend on the timing of the events and when the mortgage application was submitted. Certainly if the AIA claim was for 2014/15 the impact of not claiming in the return could possibly not be felt until 31.01.2016 if the tax was just to be a balancing payment at that point. Otherwise the impact would be felt sooner as the POA for 2014/15 would not account for the large AIA payment.  You have not given enough information to consider that. If the 2014/15 return was to be submitted without an AIA claim you could add a white space note to advise a claim was to follow (for whatever reason) as HMRC would possibly query such a large subsequent change.

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James Reeves
By James Reeves
21st May 2015 13:15

Reduced POA

@possep

If you initially submitted the return without the AIA but were intending to claim it, then you would elect to reduce the POA to the level you knew would be correct once the AIA was claimed and note this on the return. Then when you eventually claimed it (provided it was before the deadline) the POAs actually elected would be correct and no interest would be payable and everybody is happy.

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