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Is AIA restricted to the amount of profit?

AIA

Evening all

I have a scaffolding client who has spent £50,000 on scaffolding.  Their previous accountant put this to the P&L which created an £11,000 loss.  I believe that the scaffolding should be an asset which therefore means they have a profit of £39,000. My question is, does this mean that the AIA I can claim for them is restricted to the £39,000, therefore meaning they have £0 profit for tax purposes or can I claim the full £50,000, thus carrying forward an £11,000 loss to the following year?

Thanks for the help in advance

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By Matrix
25th Feb 2018 07:15

He can choose the amount of the AIA to claim, he may wish to claim an amount which preserves his personal allowance.

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to Matrix
25th Feb 2018 08:04

Unless I’ve misread, you’ve assumed that the client is unincorporated?!

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By Matrix
to atleastisoundknowledgable...
25th Feb 2018 08:48

It doesn't say. I think my assumption arose since I didn't expect an accountant to be preparing company accounts and not know the mechanics of the AIA.

If it is indeed a company then make the full claim.

Maybe the OP could clarify.

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to Matrix
25th Feb 2018 10:29

This is for a LTD and I’ve never had a LTD client with a loss so AIA and lossses was never something I came across. This client has potentially made a loss if £50,000 of AIA is claimed and I cannot find anywhere online that says it’s ok to claim an amount of AIA which creates a loss.

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By Matrix
to MrDSGrace
25th Feb 2018 10:42

Per above I would claim the full amount, capital allowances can create a tax loss.

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to Matrix
25th Feb 2018 10:52

Thanks for your response and help. Are you able to point me in the direction to any guidance to this effect? I simply cannot find anything anywhere!

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By Ruddles
to MrDSGrace
25th Feb 2018 10:56

The reason you can't find anything anywhere is that you're looking for guidance that says you can't do something that is in fact allowed and which guidance therefore doesn't exist.

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By Matrix
to MrDSGrace
25th Feb 2018 11:00

There is nothing in the capital allowances acts to say that they can't create or increase a loss.

See the first bullet on gov.uk which should give you comfort.

https://www.gov.uk/guidance/corporation-tax-calculating-and-claiming-a-loss

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to Matrix
25th Feb 2018 11:11

Matrix wrote:

It doesn't say. I think my assumption arose since I didn't expect an accountant to be preparing company accounts and not know the mechanics of the AIA.


I didn't expect an accountant to be preparing an unincorporated business's accounts and not know the mechanics of the AIA, to be fair.
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By SteveRA
25th Feb 2018 09:35

Is there a clue in the name of the OP and the lack of basic AIA knowledge?

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to SteveRA
25th Feb 2018 10:30

You’re the disgrace for mocking someone who’s asked a question and for help. Perhaps you should change your name to MrTRolling!

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By Ruddles
to MrDSGrace
25th Feb 2018 10:55

You are a disgrace for taking money off unsuspecting corporate clients and having to ask such a question.

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to Ruddles
25th Feb 2018 11:09

So you know absolutely everything there is to know do you, without ever having look at available guidance or ask a question? Isn’t that what this community is supposed to be for? To help those of us that perhaps have never come across a certain scenario and therefore need that extra bit of guidance? And as per your other reply, I’m not looking for guidance that tells me I cannot do it, I’m looking for th guidance that tells me I can, of which I cannot find. How do you know it’s acceptable?

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By Ruddles
to MrDSGrace
25th Feb 2018 11:17

Looking at some of my wrong answers, or questions, it is clear that I do not know everything, nor do I profess to. However, I do know the very basics.

The reason that I know it's acceptable to claim the full allowance is because there's nothing to say that one can't. If you want to waste your time and carry on looking for something that doesn't exist, feel free - don't expect others to do the same for you.

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to Ruddles
25th Feb 2018 11:32

These were my thoughts originally regarding the fact that nowhere does it tell me I cannot do it, however clearly being an idiot, I thought I would come here for some friendly clarification. How wrong I was. I hope next time you ask a question you’re not made to feel like s**t. I also hope you’re not taking money off of unsuspecting clients whilst giving those wrong answers!

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to MrDSGrace
25th Feb 2018 11:27

MrDSGrace wrote:

I’m looking for th guidance that tells me I can, of which I cannot find. How do you know it’s acceptable?

You should take a look at CAA 2001. It's all covered in there. Anything else is just opinion and crazy talk.

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25th Feb 2018 11:01

Cracker of a question.

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to lionofludesch
25th Feb 2018 11:09

A cra(p)cker of a response!

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to MrDSGrace
25th Feb 2018 11:28

MrDSGrace wrote:

A cra(p)cker of a response!

I'm sure that worked in your head.

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By DJKL
25th Feb 2018 11:37

Try some reading, my google search took all of 20 seconds.

The key is the bit "To calculate a trading loss you should:

include any capital allowances (these increase the loss)"

So given CA are a part of the loss one follows the rules re relieving losses.

https://www.gov.uk/guidance/corporation-tax-calculating-and-claiming-a-loss

"Overview
If your company or organisation is liable for Corporation Tax and makes a loss from trading, the sale or disposal of a capital asset, or on property income, then you may be able to claim relief from Corporation Tax.

You get tax relief by offsetting the loss against your other gains or profits of your business in the same accounting period. You can also choose to carry the loss back, if you don’t it will be carried forward to another accounting period.

This guidance only covers trading losses.

There’s separate guidance on how to work out and claim tax relief from Corporation Tax on terminal, capital and property income losses.

Trading losses
The trading profit or loss for Corporation Tax purposes is worked out by making the usual tax adjustments to the figure of profit or loss shown in your company or organisation’s financial accounts.

To calculate a trading loss you should:

include any capital allowances (these increase the loss)
include any balancing charges (these reduce the loss)
not include any losses or gains that might be made on the sale or disposal of assets
include certain annuities and charitable donations (known as ‘trade charges’)
If you make a trading loss and it can’t be used in the same year, you may be able to choose to carry it back to earlier accounting periods, or it will be carried forward to be set off against the profit for future periods."

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