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Previous accountants cannot provide WDV bfwd

Previous accountants cannot provide WDV bfwd

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I have taken on a new client. I have most of the data from the previous accountant, it has been a bit like pulling teeth but they have provided most of the data.

The client has a very large pool of equipt that they regularly buy and sell.

I have asked for the year end breakdown of the bfwd WDV and the asset NBV in the accounts. The previous accountant has been promising me this data for weeks.

I have just received an email from them saying "...In terms of the WDV for tax purposes we did not show it separately for each item due to the AIA claims made in respect of the items.  In terms of the WDV for accounts purposes we did not show it separately for each item for the last couple of years, it was done on the assets as a whole and we showed the additions on a year by year basis...."

Question 1 - how do I calculate the charge/allowance on disposed items ongoing, given that there is £250k WDV bfwd for that pool?

Question 2 - how do I calculate the gain/loss in the accounts. This one is fine, I can estimate a value per item, tie it to bwfd depn and cost and then as the items get sold the right amount will be charged to the accounts in due course, even if the indiidual amounts are wrong.

But I cannot quite get my head round how I do the charges/balancing allowances wihtout knowing what the 250k WDV is made up of. I have already spotted that in the last few years they have put disposals in the previous tax returns that I know the client still has, so I know it is likely to be very incorrect, but thought with an item by item list I could dispose of the ones long gone this tax year, and would know that the ones prematurely disposed of in the tax return will be 100% charge when sold.

I would love to know if others have had this situation, what the best guidance is, and whether I am being daft and missing something simple.

Replies (15)

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By Wanderer
12th Mar 2021 07:54

For the tax computation if there is a tax WDV pool of general plant & machinery I'm not sure I understand what the problem is.
Have you misunderstood what a POOL is all about?

Thanks (2)
Replying to Wanderer:
Psycho
By Wilson Philips
12th Mar 2021 08:44

Agreed. I would never provide, nor ask for, an analysis of WDV.

I would, though, expect a FAR and if the prior agent is unable to provide one that is a poor show. Although a rarity, one needs to ensure that CA disposal proceeds do not need to be restricted to cost. That might be difficult without a detailed asset list.

Thanks (3)
By Duggimon
12th Mar 2021 08:52

If we were the former accountants we wouldn't be able to give you that either. Asset pools are pools, it's not meant to be broken down and there is no asset per asset balancing charges.

Do you keep all your clients' assets out of pools and claim CAs separately? Because I'm reasonably sure that's counter to the legislation.

The FAR is a different matter and they should absolutely be able to provide that, there is no way to properly calculate depreciation without it. It should be somewhat reconstructable if they can give you the most recent one they do have and the additions in the intervening period, which sounds like it's only a couple of years.

Thanks (3)
By ireallyshouldknowthisbut
12th Mar 2021 10:06

I've seen similar.

Accountants dealing with FA as "pool" using reducing balance depreciation, and all the 'FA register' is, is a single number added to the "FA pool" each year.

Hideous stuff but not uncommon. I can only assume they learned how to do basic CA's and thought it also applied to the FA register, and fell asleep before the lesson got to disposals.

Thanks (1)
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By slackaliceinspace
12th Mar 2021 10:40

sorry yes I have got my head in a spin with all this as there are so many assets, some on HP, some on operating leases.

Also by looking at last year's tax return I see some of the disposals are items that are still in use by the client today.

Trying to understand how I do this with no breakdown of the cost/depn or even just of the nbv of the assets.

Also not all the assets are eligible for AIA, I notice that in the last year they dealt with, half the purchases were added to the pool and half claimed AIA but I have no idea which.

Just wondered if others had had the same experience with previous accountants or if this was unusual. I know we have always provided full details to new accountants, but these accountants just don't have the data.

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Replying to slackaliceinspace:
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By Tax Dragon
12th Mar 2021 11:29

AIA doesn't prevent pooling.

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Replying to slackaliceinspace:
Psycho
By Wilson Philips
12th Mar 2021 11:29

Your problem is an accounting one, tax should be fine.

It doesn't matter in the slightest as to which assets have been subject to an AIA claim and which haven't. As others have said, one of the features of pooling assets is that there is no need to keep track of individual assets and their respective allowances. On disposals, all that matters is that the disposal proceeds are taken to the pool - it doesn't matter if the description of the asset disposed of is incorrect.

As I mentioned earlier, the only point that you need to watch out for is that the disposal proceeds for tax purposes do not need to be restricted. But you need the FAR for that, nothing to do with an analysis of the CA pool.

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Red Leader
By Red Leader
12th Mar 2021 10:52

I sympathise. I do recall one of the messiest a/cs preps jobs I had involved lots of FA on HP, interacting with deferred tax and capital allowances. Touch of incomplete records also, as the new HP was often only apparent as the monthly payments changed, leading to "hunt the new HP agreement".

Thanks (1)
paddle steamer
By DJKL
12th Mar 2021 11:15

If accounts run using software one would at least expect it to be possible to get printouts for x years showing the nominal ledger movements.

If old fashioned like myself you will at least have each year a fixed asset lead schedule, mine on excel, and additions and disposals listed re the year, if I had been really efficient I might even have taken photocopies of the invoices to include in the working papers. (if super efficient I would have a fixed asset register)

Ignoring the tax side, if a business cannot supply such a list after a little work collating numerous years, especially if a company, there is an argument it has not maintained proper accounting records

Thanks (1)
Replying to DJKL:
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By slackaliceinspace
12th Mar 2021 11:28

The client has provided me the details of what they have, so I have created a new FAR.

The data was in their book keeping records but they have no record of the depreciation, as the accountants have never provided any year end journals

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Replying to slackaliceinspace:
paddle steamer
By DJKL
12th Mar 2021 12:10

You can roughly work it out if you know date of purchase, in fact if you plug date of purchase, item description and cost into excel you ought to be able to write a formula to get excel to auto calculate the depreciation to the last accounts date, providing depreciation policy has not changed.

In addition if say a 25% RB one does not need to go back that many years before everything before those years still held can be treated as effectively fully depreciated.

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Replying to DJKL:
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By I'msorryIhaven'taclue
12th Mar 2021 11:44

I too construct a FA schedule that serves as something of a register, within Excel working papers for each client; with annual updates and cumulative dep'n / disposals / wdv etc and auto-calculation of dep'n for the period. Those schedules often start off with Year 1 figures of "pool b/f from previous accountant". Lord knows what's in there!

Do small audit-exempt companies still maintain FA registers? From what I've come across, not many seem to bother.

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Replying to I'msorryIhaven'taclue:
boxfile
By spilly
12th Mar 2021 14:37

Most of my clients keep asset registers because I ask them to, and have trained them up to be able to do this themselves.
Admittedly most are on spreadsheets, but there are a few technically able ones that have set them up within their software. Saves loads of time at the year end as we are not searching through general purchases to locate any new assets.

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RLI
By lionofludesch
12th Mar 2021 18:18

I remember doing huge capital allowances comps for farmers where the allowance was calculated on each bit of machinery. All then typed up, proof read and sent to HMRC with the tax return and accounts.

It was a huge waste of time and, happily, along came pooling.

What a relief !

Thanks (1)
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By Calculatorboy
13th Mar 2021 01:52

the tax wdv bf is not a problem.

If its unincorporated ask them for last fixed asset analysis of accounts nbv and individual additions since then , should be easy to reconstruct nbv bf .

Alternatively just bring nbv total bf and start keeping a detailed F/a register subsequently , just guesstimate with client help the nbv of disposals

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