CT600 and AIA

by **Derekm** on Thu Jun 16, 2011 10:14 am

Hello

I am helping a friend who has just come to the end of his first year of trading and is just filling in his CT600.

I have a couple of questions regarding Corporationd Tax.

1. On the CT600 what figure is put in at Box 3. Is this the adjusted profit figure after taking into account depreciation (writing back) and Capital Allowances?

2. They have made a smal profit of £1500 and have bought a van during the year at £2650. However this was purchased by the directors wife and then transfered into the company after incorporation (incorportation 5th may van purchased later in May) against directors loan account. Can AIA beclaimed against this ?

Thanks for replies

Derek

by **collich** on Thu Jun 16, 2011 11:18 am

Is the director (husband of the van purchaser) a shareholder and if so - what is his % holding.

by **Derekm** on Thu Jun 16, 2011 12:43 pm

Husband - Director and 100% shareholder.
Wife not director or share holder but employed under PAYE from Dec 10 company started in May 10.

Derek

by **collich** on Fri Jun 17, 2011 12:41 pm

I should make you aware of an anti-avoidance provision (s.214 CAA 2001). This will stop the company claiming an AIA if it purchases an asset from a connected party (which the company and the director's wife are in this instance by birtue of the director's shareholding).

There is a provision which states that it will apply if the aim is to secure a tax advantage. Which on the face of it doesn't apply here. I'm not sure whether HMRC apply this rule aggresively or not.

It isn't a simple answer - unfortunately.

by **Derekm** on Fri Jun 17, 2011 12:56 pm

Thanks for the information.

In this case they did not think about the difference between themselves and the company when getting the seller to write out the receipt!!

Also could you give me a view on question 1 please.

regards

Derek

by **collich** on Fri Jun 17, 2011 3:40 pm

It is indeed the tax adjusted profit (after depreciation & CAs)

by **Derekm** on Fri Jun 17, 2011 4:20 pm

collich wrote:It is indeed the tax adjusted profit (after depreciation & CAs)

Thanks for that.

One last question. In the senario I gave of £1500 profit and a capital cost of £2650 how do you treat the b/f
There will be a profit in the next financial year.

Is it

a) Write down the profit to zero and create a short life pool of £1150 and claim WDA of 20% per year.
b) Have a tax loss of £1150 which you carry forward to the following year ?

regards

Derek

by **Derekm** on Sat Jun 25, 2011 12:25 pm

Could any one answer the above question or point me to somewhere on the web which gives some examples.

Thanks

Derek

by **RAL** on Sun Jun 26, 2011 10:34 am

if £1,500 is tax adjusted profit than

PCTCT = Tax adjusted profit £1,500 less £530 (Written down allowance on £2,650) so you pay CT on £970.00

Your Capital allowance pool would be

Addition £2650
less WDA @ 20% £530
WDV c/f £2,120.

You claim the written down allowance next year at appropriate rate.

by **Derekm** on Sun Jun 26, 2011 11:26 am

Ral

Thanks for the reply. I think I have not worded th e question correctly as I understand your answer but.

The £1500 profit is offset by the Annual Investment Allowance so the CT is zero for the year. My question was, does this create a c/f loss of £1150 or does this create a pool to be carried forward of £1150 which will then attract WDA of whatever is applicatble in subquent years.

Thanks

Derek