Home For accounting professionals General accounting discussion
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚


capital allowances i have got confused....

DOTTYDOTTY Settling In NicelyRegistered Posts: 22
Hi All,

I was wandering if anybody could put my mind staright...............
My husband has been unemployed for 7 years and last November after re-traning decided to set up as a sole trader - plumber. He han't had many jobs so there isn't any real profit. In February we used all our savings to buy him a van. I was thinking if we put this into the business and claim AIA on it, we will have no profits to offset it agianst and as he hasn't worked either, he hasn't used up his personal tax allowance and isn't likely to do so in the next couple of weeks. If we put the van in which cost £2,850.00 will this be lost? can we introduce it in yr 2 and write it down or would this be sort of wrong? Also we got a start up loan from our local buiness centre which we used to buy two large tools costing £1000.00 each, would we have to claim AIA for them or can we introduce those also in yr 2?
Any advice would be much appreciated.
Thank You.

Comments

  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    You can disclaim the AIA and claim WDAs next year.

    You can't 'introduce' the assets next year and claim AIAs if they have already been used by the busines this year.
  • AK002AK002 Font Of All Knowledge Registered Posts: 2,492
    Dean, would AIA not just create a loss that can be carried forward and offset against future profits? ( I don't know it's a genuine question lol)
  • qwertyqwerty Feels At Home Registered Posts: 82
    In this situation, I would *usually* disclaim capital allowances as it is not beneficial to claim them.

    There is no income for which the losses can be carried back against to obtain a tax refund and therefore the losses will be carried forward and automatically set off against future trading profits. If these profits are small, the personal allowances may therefore be wasted in future.

    Also, keeping the capital allowances till a later date may give a more flexible use for them in the future. Say next year a trading loss occurs but the trader has other income (e.g. they receive an inheritance which results in savings income). These capital allowances can then be claimed to increase the loss to offset against this income. If the capital allowances are claimed this year, they could not be used (trading income offset only).

    The individual's personal circumstances need to be looked at before you can say what is best, but I cannot see how claiming capital allowances to create a loss would be beneficial.
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    AK002 wrote: »
    Dean, would AIA not just create a loss that can be carried forward and offset against future profits? ( I don't know it's a genuine question lol)

    Yes. That is definitely an option to consider.

    Carried forward losses must be set against first available profits so you need to be confident that there are going to be sufficient profits to set them against without wasting personal allowances.

    As WDAs are now only 20%, this may well be the best option to go for.
  • DOTTYDOTTY Settling In Nicely Registered Posts: 22
    Hi All,

    Thank you very much for all your replies, with these in mind, i am gong to introduce all assets in yr 2 of trading and claim WDA on them.
    My mind is now straight thank you.
Sign In or Register to comment.