Tax - Fixed Asset

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Our FD has just decided not to capitalise something and wants it to be expensed instead, he asked me to think about what the tax implications would be? I did say 'oh been a year since those exams....' but he still wants an answer, wants me to think about it on the way home....great!<BR><BR>Any help much appreciated.<BR><BR>Many thanks<BR>Geraldine

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Tax - Fixed Asset

    Funny you ask this question.... I have just gone through this today with my senior....<BR><BR>The company had made a loss anyway so it wasn't tax efficent to capitalise the FA's... it is better not to do it so that in future years you can offset a higher capital allowance on any profits made....<BR><BR>Like I said i've just gone over it today so I may not be totally correct.... but I hope i've helped in giving your boss an answer :-D<BR><BR>Regards<BR><BR>Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Tax - Fixed Asset

    Thanks Dean.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Tax - Fixed Asset

    Surely one cannot â??cherry pickâ?? what is to be capitalised and what is not. If assets meet the standard definition as per the standard (FRS 15) of an asset then it should be capitalised.<BR><BR>I think that you can choose not to assign capital allowances to the asset in the situation where there is a loss, but too be honest itâ??s been a while since I studied that last.<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Tax - Fixed Asset

    Here is a quote from an accountancy firm I came across via the web... (in tax tips)<BR><BR>"Not claiming capital allowances<BR>Companies will benefit by not claiming capital allowances, including first year allowances, thus increasing the amount available for allowances in later years, if they would otherwise have taxable profits of less than £10,000. This is because the rate of corporation tax on profits of up to £10,000 is nil. Similarly, where they want to leave profits high enough to take advantage of reliefs which are only available in the current period, such as group relief for losses, or double tax relief".<BR><BR>Regards<BR><BR>Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Tax - Fixed Asset

    Dean is right although ghoban said about not capitalising something. I believe you can't chose whether to capitalise it or not but you can choose whether to claim all the capital allowances on it.<BR><BR>annette

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