Capital Allowances AIA or WDA?

Laura8192 Feels At HomeRegistered Posts: 95
I have a client who purchased a van in this tax year, for just over £4,000. Ltd co, and van is purely business use.

From what I have read, I can either put the full £4,000 through as an AIA this year, or use the 18% WDA fore this year and subsequent years.

I just wondered if there are any major reasons why not to use the AIA and use the full £4,000 against profits this year?


  • Laura8192
    Laura8192 Feels At Home Registered Posts: 95
    I also have another client, who is a sole trader, started trading 01/01/2013 and made a £5k loss in the 3 months to 31/03/2013. He purchased a trailer for £1,500 so I could potentially claim AIA or WDA on this, but am I right in thinking that as he has made a loss I'd be better waiting until next year to claim this? If I wait until next year can I still claim the full amount as AIA or do I need to claim 18% WDA?

    Thank you for your help :-)
  • T.C.
    T.C. Experienced Mentor Registered, Tutor Posts: 1,448
    Firstly, if a client claims the full AIA on the van, you must just advise them that if they sell the van, then there will be a balancing charge to pay.
    Secondly, if there is a loss in the year, then it would not make sense to take AIA, but to take the 18% CA the next year. I hope that helps.
  • Laura8192
    Laura8192 Feels At Home Registered Posts: 95
    Thank you for this, if Client 1 takes the full AIA, and then sells the van in 5 years time, would there still be a balancing charge to pay?

    For Client 2, thats what I thought, but having someone else say it too is always reassuring!
  • burg
    burg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,441
    Scenario 1 - there can be advantageous times for not claiming AIA and losses and utilising PA's are a couple.

    Scenario 2 - yes defer and claim WDA next year. no AIA is available though can only be used in year of purchase.

    in respect of balancing charge question - yes there will be if the van is sold for more than £0

  • deanshepherd
    deanshepherd Font Of All Knowledge Registered Posts: 1,809
    Scenario 1: As this is a limited company I cannot think of a reason why you would not claim AIA. There is no PAs to preserve and not much option but to carry forward losses. Claiming WDA instead is going to leave your client waiting a long time for the tax relief.

    Scenario 2: What are you doing with the losses? If they can be utilised to get tax back in current, previous or earlier tax years then increasing them will probably get you even more tax back.
  • burg
    burg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,441
    @deanshepherd - sorry missed the Ltd Co bit. I just read the question part and answered.

  • Gem7321
    Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    Agree with Dean - claim AIA and maximise the loss
  • villapb
    villapb Trusted Regular Registered Posts: 357
    Dean is right use full reliefs now and carry forward loss, because just imagine say next tax year is brilliant and makes a good profit ............for example so best tax planning is to take full AIA
  • Laura8192
    Laura8192 Feels At Home Registered Posts: 95
    Sorry think I am confusing everyone as there are 2 clients here:

    client 1 is a ltd co, good profit this year so can use AIA on the van and remember there is a balancing charge when he sells the van. But Ltd Co bought the van from Director so not sure if this makes a difference?

    Client 2 is a sole trader, made a loss, no other income to offset loss against so think I will use WDA next year. Or do you think I should use full AIA this year and make the loss bigger in effect, to carry forward to next year?
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