Capital Allowances, WDA and WDV

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT member discussion
Hi

With regards Capital Allowances; am I right in thinking that as a small business I can take 50% capital allowances against my office furniture and computer equipment, and then take 25% reeducing balance method after that.

Is this instead of depreciation?

What is the bookkeeping for it? I only ever studied depreciation, and have never dealt with this before.


Do you need to keep an 'provision for accumulated capital allowances' type of account.

Help greatly appreciated

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Allowances, WDA and WDV

    Hi there

    You can only have a WDA of 50% only purchases after 06.04.06 NOT the year to 05.04.06 which is 40%.

    Re depreciation and WDAs - depreciation goes through the accounts but is an add back on the tax return where WDA's must be used.

    Hope this helps.

    Claudia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Allowances, WDA and WDV

    Thank you.

    So just to clarify. When I'm completing the books for my clients to see thier profits etc, I use depreciation, to what ever methods and amounts they see as appropriate to the business. And then when completing the tax return, I add back in the depreciation, and the use the capital allowances.
    So I guess you have to keep a record of both so that you know what remains in your pool etc.

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Allowances, WDA and WDV

    In a word - Yes! Don't forget about p/use etc and any other add backs that are necessary between the accounts and tax.

    Have you studied business and personal tax yet? If not, I would think very carefully before handling tax for any of your clients.

    Claudia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Allowances, WDA and WDV

    No I have only studied AAT intermediate.

    I just thought that to be able to know how to keep books for people, I would ned to know about capital gains, and what expenses can be put through the business etc.

    The info i needed re the tax return was more for my partner, who I'm doing the accounts for.

    Do you think then, that it is possible to offer bookkeeping servcies, and literally just keep the books, and any issue regarding capital allowances etc, advise them to see an accountant?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Allowances, WDA and WDV
    annamalones wrote:
    Do you think then, that it is possible to offer bookkeeping servcies, and literally just keep the books, and any issue regarding capital allowances etc, advise them to see an accountant?

    Yes, always be striaght forward with any clients books... set out your capabilities from the outset and if your not confident with something always point it out to them and tell them they must seek further advice....

    Either that or build a relationship with an accountant and if you are stuck you have someone you can ask.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Allowances, WDA and WDV

    Have you got PI? On the prop form you need to state what services you are giving to your clients, and your insurance will only cover you for those services.

    Also to abide by the AAT code of ethics, you must not offer services that you are not qualified to provide.

    Claudia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Allowances, WDA and WDV

    I'm just struggling to see how I can keep the books one way. for example, deprecate office equipment to how the client wishes. But then when fill in thier tax return and use the capital allowances method, they will see a totally different profit figure.
    Surely they would want me to keep the books as to how the HMRC would want the figures to be kept and then they can see exactly what profits tyhey've made and how much tax they are liable for.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Allowances, WDA and WDV
    annamalones wrote:
    I'm just struggling to see how I can keep the books one way. for example, deprecate office equipment to how the client wishes. But then when fill in thier tax return and use the capital allowances method, they will see a totally different profit figure.
    Surely they would want me to keep the books as to how the HMRC would want the figures to be kept and then they can see exactly what profits tyhey've made and how much tax they are liable for.

    Net profit is different to Taxable profit.

    I'd like to explain all about tax computations but if you haven't yet done the tax modules it could get very confusing for you.

    Your obviously very keen and wanting to learn but I would say to stop there and pass on the information that you have now prepared.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Allowances, WDA and WDV

    http://www.aat.org.uk/students/display/store3/item317

    This is a link to the student part of the site, and talks about self employed students, the ethical guidelines etc.

    I think it would help you a lot to read this, and understand what you can, and cannot, do for your clients.

    Claudia

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