Client’s year end is 30/06/18. His only fixed asset (van) is sold on 25/06/18 (TWDV £8,500 – sold for £5,000 tax loss £3,500). For his tax year ending 30/06/18 should the balancing amount of £3,500 be forced and allowances claimed in year to 30/06/18? Tax software leaves a TWDV of £3,500 meaning we would be claiming annual allowances in future years. Can the company claim Balancing allowance for the loss of £3,500 in the year to 30/06/18? Please do point me to the correct legislation that permits claiming of the balancing allowance?
For information, the client does buy a bigger and more expensive one on 15/07/18.
Replies (15)
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It is not optional, you need to put the proceeds into the capital allowances section and then your software will generate the balancing allowance.
Don't your clients discuss large capital purchases before they make them, he could have accelerated the relief if the new van was bought two weeks or so earlier.
I find that most of my clients with vans invariably have 1% or 2% private usage and it gets put in a separate pool thereby resulting in a balancing allowance on disposal.
When posting in the future, please make sure that you provide full and accurate information to stop folks wasting their time. Yes, you did mention "company" in the OP, but you also referred to "his" fixed asset and to "his" year end, so the assumption was that "company" was (ab)used as a generic term.
As others have mentioned, there is no balancing allowance - not all the time the business continues.
Why was AIA not claimed on purchase? OK you would have subsequently got a balancing charge - but it at least you wouldn't have ended up with a pool balance to carry forward ad infinitum.
I'm guessing that the van was purchased some time ago. Where AIAs are not claimed in full, it's worth considering whether a Short Life Asset election might be beneficial.
Perhaps it is well worthwhile to refer to this information from HMRC:
"https://www.gov.uk/government/publications/capital-allowances-and-balanc..."
Balancing Allowance:
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"Balancing allowance
If your business stops trading, you can claim any balance left in the pool after you take away the amounts you get for selling it (or the market value of things you don’t sell) as a balancing allowance.
You take balancing allowances off your taxable profits. You only get a balancing allowance in the main or special rate pool when you stop your business. You can get a balancing allowance in a single asset pool when you sell or dispose of the asset that is in it."
Single Asset Pool:
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"Single asset pools
Items of equipment (including cars) you use for both business and private purposes don’t go into your main or special rate pool. Instead, you put the cost of each into its own single asset pool. If you’re an employee and receive a payment from your employer to cover any fall in the value of an asset you own, you put the asset in a single asset pool and take off your employer’s payment from the pool’s value. (This will reduce your Annual Investment Allowance (AIA) and writing down allowance (WDA).)".
Insofar as I believe, Balancing Allowances are now rather limited and in the case of a van, then unless this was claimed as a Single Item Pool item and HMRC notified in writing as such, then, sadly, Sayonara .