Treatment of capital allowance on only asset sale

Treatment of capital allowance on only asset sale

Didn't find your answer?

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)

Please login or register to join the discussion.

avatar
By Matrix
25th Oct 2018 19:53

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.

Thanks (0)
By Ruddles
25th Oct 2018 20:32

Can you guess the important missing information?

Thanks (0)
Replying to Ruddles:
paddle steamer
By DJKL
25th Oct 2018 20:59

Which pool is it in, or am I on the wrong track?

Thanks (0)
Replying to DJKL:
By Ruddles
25th Oct 2018 21:21

Move to the top of the class

Thanks (0)
Replying to DJKL:
avatar
By KnowHow
25th Oct 2018 23:13

Hi @DJKL,

The asset was in the general pool with capital allowances at 18%. The original intention was to keep the van (sold in Jun 18) for 7 years plus. He couldn’t buy the newer van any sooner than Jul 18 (which was after the year end).

Thanks (0)
Replying to KnowHow:
By Ruddles
26th Oct 2018 07:53

No balancing allowance then

Thanks (0)
avatar
By thomas34
26th Oct 2018 08:28

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.

Thanks (4)
Replying to thomas34:
By Ruddles
26th Oct 2018 10:37

Tax planning at its simplest, seemingly overlooked in this case.

Thanks (1)
Replying to thomas34:
avatar
By KnowHow
26th Oct 2018 10:49

Hi @Thomas34,

Just for information, client is Ltd and he did not have any private use of the van (due to its nature). At time of purchase, it was not beneficial to claim the purchase value as AIA and decision was to claim capital allowances annually.

All,

Thanks for your help. I have got my answer - Much appreciated. Great community.

Thanks (1)
Replying to KnowHow:
By Ruddles
26th Oct 2018 10:55

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.

Thanks (1)
Replying to Ruddles:
avatar
By KnowHow
26th Oct 2018 18:56

Noted.

Thanks (0)
avatar
By Swedish Chef
26th Oct 2018 10:11

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.

Thanks (0)
JCACE
By jcace
26th Oct 2018 12:05

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.

Thanks (1)
Replying to jcace:
By Ruddles
26th Oct 2018 12:14

Again, simple tax planning.

Thanks (0)
avatar
By Michael C Feltham
29th Oct 2018 13:38

Perhaps it is well worthwhile to refer to this information from HMRC:

"https://www.gov.uk/government/publications/capital-allowances-and-balanc..."

Balancing Allowance:
____________

"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:
__________

"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 .

Thanks (0)