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Gain on sale of asset - CT600

Gain on sale of asset - CT600

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Please forgive the basic question, as many of you know I have been on maternity leave and the old brain isn't what it used to be. And this is the first time I have come across this scenario in practice.

If someone could confirm the following is correct, I would be most grateful! Or if I have officially lost the plot, I'd love to know the right answer.

Client disposed of a motor vehicle asset for more than the purchase price (yes, I know, unusual!).

- The gain on disposal goes to the P&L and is added back in the tax comp.

- The purchase price only is added back to the capital allowances pool

- The excess is noted in the chargeable gains section of the CT600, box 16. Gain is indexed (that took me back a few years!). I'm using Taxfiler so it takes me through the whole disposal process.

Thanks so much and Merry Christmas.

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19th Dec 2015 15:32

What sort of motor vehicle was it?

Your first two bullets are correct. The third may or may not be.

See CG76906 and CG76907.

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By Monsoon
19th Dec 2015 15:58

Thanks so much Steve for your reply.

It is a normal car on which capital allowances have been claimed (WDA 8%), so it doesn't fall under the exemption as a car or a wasting asset. It's the only asset in that pool, though immediately after disposal there is a new addition.

I think my confusion arises from the difference between a balancing charge, and a chargeable gain, and I am not sure which one I need to do here. I am sure you can never add back more than the original price back into the pool, and so some kind of chargeable gain has to be accounted for?

Sleep deprivation and tax guidance don't mix well!

 

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By Monsoon
19th Dec 2015 16:07

It was a test...

fawltybasil2575 wrote:

I believe that it might possibly be preferable to deduct the gain on disposal, in the CT Computation, instead of adding it :).

Basil.

Pffft! Yes, that thing. That's what I meant :)

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By Triggle
19th Dec 2015 21:14

Hi Monsoon

If the car is an ordinary passenger vehicle (and not a vehicle listed in the CG76907 link provided above by Steve) then the car is exempt from capital gains tax. The fact that capital allowances were claimed or could be claimed but were not is irrelevant.

You just, as Basil has said, deduct the profit on disposal from trading profits before calculating the Corporation Tax.

The disposal proceeds will be brought into the capital allowance pool the sold car is in but restricted to the sold car's original cost when it entered the pool.

This would (if only the car sold was in that pool and without the addition to the same pool of a new car) result in a balancing charge which would effectively claw back any capital allowances given on the sold car (which would be correct as the taxpayer has not suffered any diminution in value of the car throughout its period of ownership so why should they get any capital allowances on it).

As regards the new car it depends on the CO2 emissions as to whether it will be placed in the same pool as the car sold (the 18% main rate pool or the 8% special rate pool).

If it does go into the same pool as the car sold you add the cost of the new car to the WDV brought forward first then take off the disposal proceeds of the car sold (restricted to the original cost of that vehicle).

If this results in a negative balance on the pool then that is a balancing charge.

If the pool has a positive balance, then that pool balance will attract WDAs at the appropriate rate (18% or 8% depending on which pool it is in based on the CO2 emissions).

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By Monsoon
22nd Dec 2015 21:05

Thank you Triggle for your comprehensive reply :)

That makes perfect sense. You're a gem. Merry Christmas!

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