Tax: Sole Trader - v - Capital Allowances question!

anniem

Can anyone help, please?

A sole trader has a net income of about £8,500 in the year and he purchased a new van during the year (first year and just started self-employment).

The van cost him £14,250.

Can he claim Capital Allowances on his tax return?

If so, can he claim FYA @ 40% (£5,700)?

Look forward to hearing from anyone who can help!

Anniem :confused1:

Gem7321

He can claim 100% AIA as it's a van

anniem

Not sure what AIA stands for!

Bluewednesday

anniem wrote: »

Not sure what AIA stands for!

Annual investment allowance

anniem

OK - I don't recall coming across Annual Investment Allowance anywhere yet - and I can't find it in my books.

Please can you explain how this works?

Is there a set limit, or is it calculated from the profit figure somehow?

The van is on finance, so finance costs have been factored into his accounts, he purchased it in October and his year end is 31 March. I thought this may be important as it could be that only 6/12 is allowed.

Anniem

anniem

That's amazing - I'm sitting here reading Accounting Technician, turn to page 30 and it's all there!

AIA - 100% on first £50,000!

I took PTC/BTC last year and this wasn't in the syllabus then, as I was working on rules for the year ended 5 April 2008 - when AIA hadn't been invented!

Gosh it shows you how the rules change!

Thanks for all your help!

Anniem

anniem

It occurs to me that as he only had £8,500 net income by offsetting 100% £14,250, he will make a loss on his Tax Return of about £5,750.

This can then be deducted from next year's profit(assuming he makes one) for tax purposes. Can't it?

Bluewednesday

There are a few things he can do, depending on what is going to work for him and with the limited information we have we couldn't tell you the best one way or another.

He could carry the whole loss forward against next years trading profits
He could carry it back and get a tax refund for last year if appropriate
He could disclaim part of the capital allowances and carry a lower loss forward or backwards, preserve his personal allowance and have something to relieve against tax over the next few years.

It all needs investigating and calculating as to which is the best option.

anniem

OK - how do you go about working it out?

What additional information is needed?

More background; wife also self-employed and had a baby at the end of last year, so the family are dependent upon his income. Also have the added expense of a baby at the moment.

I knew that you could carry the loss forward, but didn't know about the other options.

I suppose it would be helpful to know his tax position for last year, wouldn't it?