A sole trader vehicle dealer bought a van for £15,000 (ex VAT) two months before the accounting year-end. By the year-end the van was being used for the business and it is intended that it will continue to be so used for the foreseeable future. The market value (retail) was £17,000 (ex VAT) when first used by the business. Presumably the appropriation from trading stock will be treated as a sale at £17,000. For capital allowances purposes, I assume that AIA will be available on £15,000 and WDA on £2,000. Is this correct?
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No, imho, the transfer is £15000 and AIA is due on the whole.
Where would we be if motor traders had to "sell" vehicles to themselves at inflated notional prices and only claim AIA on what they paid to the third party ? It's complete madness.
HMRC are mad, then:
CA11530
You might also want to have a look at ITTOIA 2005 s172B. It's also worth noting that, although not directly relevant in this case, CAA 2001 s13 restricts qualifying expenditure to the lower of market value and actual expenditure incurred.
CA11530 refers only to WDAs, but I don't see anything that would prevent a claim to AIA in these circumstances.
HMRC are mad, then:
I thought that was generally accepted following their MTD proposals.
Market valuations are merely opinions.
Market valuations are merely opinions.
Of course they are. But if the opinion (which is shared by all parties) is that the market value is £17k and the cost £15k then you have an appropriation at £17k and capital allowances on £15k. However mad that may seem.
So what? We've not been asked for an opinion of the market value. We've been asked to comment on the treatment on the assumption that the market value is £17k, and the cost £15k.
Used to have a client who, used trucks for his business, hired out trucks and bought and sold trucks. At the actual point of purchase he often didn't know which category the truck fell into, as he bought them on the basis that they were simply a good buy. We therefore didn't rush into categorising them until we had to, which was basically when we did the accounts.