Capital Allowances
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Hi
I've got two clients that I have done the Bookkeeping for this year and then passed to Accountants for the Final Accounts and Tax Return to be completed.
Both clients are Sole Traders that started in January 2005 and had a year end date of March 2006, they also both had equipment they had previously owned that they took into the business with them. This is where I have a problem because they've both gone to different Accountants and the Accountants have dealt with the Capital Allowances differently!!
The first one has said that they can not claim the first year allowance on the equipment already owned before the business started and that they can only claim the Capital Allowance for the few months they were in business. Whereas the second Accountant has said the client can claim first year allowances as although the equipment was not new it had still been introduced to the business, this Accountant has also said even though the client had only been in business for 3 months they can still claim the full years allowance.
Which Accountant is correct or are they both? Should I take this one up with the Inland Revenue?
Sue
I've got two clients that I have done the Bookkeeping for this year and then passed to Accountants for the Final Accounts and Tax Return to be completed.
Both clients are Sole Traders that started in January 2005 and had a year end date of March 2006, they also both had equipment they had previously owned that they took into the business with them. This is where I have a problem because they've both gone to different Accountants and the Accountants have dealt with the Capital Allowances differently!!
The first one has said that they can not claim the first year allowance on the equipment already owned before the business started and that they can only claim the Capital Allowance for the few months they were in business. Whereas the second Accountant has said the client can claim first year allowances as although the equipment was not new it had still been introduced to the business, this Accountant has also said even though the client had only been in business for 3 months they can still claim the full years allowance.
Which Accountant is correct or are they both? Should I take this one up with the Inland Revenue?
Sue
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Comments
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Re:Capital Allowances
Second one is correct.
If it was a WDA then the first one would be correct in saying only 3 months is allowable but as it's assets introduced then he can claim FYA.
Regards
Dean0 -
Re:Capital Allowances
Hi Dean
Does this mean that you can still claim FYA when the equipment is several years old and you hold no paperwork to show when it was purchased or the original cost?
Sue0 -
Re:Capital Allowances
Yes. The asset should be brought in at their current market value not original cost.
Regards
Dean0 -
Re:Capital Allowances
I agree with Dean, WDA's are apportioned if the accounts aren't drawn up for a full year and FYA are always claimed in full, but I don't think that the first accountant is necessarily wrong.
Firstly FYA's don't HAVE to be claimed, and secondly there are quite a few restrictions on claiming them, such as you're not meant to claim them on items which were used for another purpose before being brought into the trade, or if the item was bought from a 'connected person'.
Jodie
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Re:Capital Allowances
Hi Dean/Jodie
Thank for you help on this.
Both clients would have been using the equipment before going into business.
My other reason for questioning this is because I'm hoping to do my own Tax Return today and I also set up as Self Employed part of the way through the 05/06 year and wanted to check how I should treat items such as my laptop which I have owned for a couple of years!! I guess from what Jodie has said that because I was already using the laptop it should be a WDA and apportioned for the part of the year I was Self Employed?
Sue0 -
Re:Capital Allowances
Well what I've said comes from what I learned doing ATT and from Tolly's tax book, but it could be that it's an area that the Inland Revenue aren't too strict on.0 -
Re:Capital Allowances
I've just tried looking on HMRC's website but that part of the website is down at the moment!
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