Capital Allowance query

KaelaH

I am in the middle of a Company Tax Return and have noticed that Capital allowances were only claimed on 1 large purchase (a van) last year and not on other, smaller, fixed assets that would qualify. I am guessing this was done as the van more than covered the profits the company made.
However, i am wondering if it is possible to claim some of this unutilised capital allowance this year or is it too late?

jamesm96

KaelaH wrote: »

I am in the middle of a Company Tax Return and have noticed that Capital allowances were only claimed on 1 large purchase (a van) last year and not on other, smaller, fixed assets that would qualify. I am guessing this was done as the van more than covered the profits the company made.
However, i am wondering if it is possible to claim some of this unutilised capital allowance this year or is it too late?

As far as I remember from studying the technicality of it all way back when, Capital Allowances are optional; you don't have to claim them, but you can if you chose to, in which case there's no reason not to start now, the client simply chose (apparently without knowing it!) not to claim them last year.

That said, I'm not sure what rates you'd use for AIA, though if they're only small and there was only a van last year then it makes no difference anyway.

Monsoon

I don't know why you'd restrict capital allowances for a company. For an individual, you would do it to preserve personal allowances and not waste the CAs, but for a company, I can't think of a good reason. If AIA or WDAs take a profit into a loss, the loss will carry forward to the following year.

If AIA isn't taken in the year of purchase, then the only allowances in subsequent years are the relevant WDAs.

KaelaH

I spoke to the CT office at HMRC, finally got a call back, and they've advised me to amend last years return and submit that with revised computations. Fingers crossed that will do the trick

qwerty

It can sometimes be beneficial for a company not to claim all of the capital allowances.

Example 1
Company has trading losses and interest received. Assume it claims maximum capital allowances in year 1 creating a trading loss which is carried forward. In year 2 the company's trading profit breaks even so it does not use this loss brought forward, but has interest received so must pay tax on this.

If, instead, the company did not claim the maximum capital allowances in year 1, they could then claim higher allowances in year 2 to turn the break even into a trading loss which can be offset against the interest received and reduce the corporation tax payable in year 2.

Example 2
(This could help with your question on groups, Monsoon) Assume Subsidiary always makes a loss and Parent [P] always makes a profit. If in one year, due to claiming all of the available capital allowances there are excess trading losses which cannot be surrendered to the parent, then these losses will go to waste, as S will never have use of them.

S would in this instance restrict the capital allowances claim to create a sufficient loss which can be surrendered to P and no more. It can then claim these allowances in future years which can be surrendered to P.

clegganator

qwerty wrote: »

Example 1
Company has trading losses and interest received. Assume it claims maximum capital allowances in year 1 creating a trading loss which is carried forward. In year 2 the company's trading profit breaks even so it does not use this loss brought forward, but has interest received so must pay tax on this.

Heinsight is a wonderful thing!

qwerty

Yes, but you could always amend the prior year's return (assuming you are within time limit).

You can also get a general feel of what is happening with clients and whilst you cannot be certain of what will happen in future, sometimes you can just tell things are going a certain way.