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Where Taxpayers and Advisers Meet

Sole Trader BBLS for new van

SquirrelMonkey
Posts: 1
Joined: Tue Oct 06, 2020 2:50 pm

Sole Trader BBLS for new van

Postby SquirrelMonkey » Tue Oct 06, 2020 2:59 pm

Hi,

I'm a sole trader and considering taking out a BBLS for a new van, 100% business use.
If I use a BBLS for a new van, does that mean I can't claim the AIA for the cost of the van in my self assessment?
I usually complete my own tax return but worry that a BBLS will complicate this to the point I won't be able to complete it myself.
But turnover is down significantly this year so I am keen to take advantage of the financial help on offer.

Thanks

robbob
Posts: 2985
Joined: Wed Aug 06, 2008 4:01 pm

Re: Sole Trader BBLS for new van

Postby robbob » Wed Oct 07, 2020 9:18 am

If I use a BBLS for a new van, does that mean I can't claim the AIA for the cost of the van in my self assessment?
No the BBLS does not have any impact on whether AIA's can be claimed or not.
I usually complete my own tax return but worry that a BBLS will complicate this to the point I won't be able to complete it myself.
Thats your choice - note if you dont do balance sheet relevant implications will be minimal - you will simple need to include fees/interest as approrpiate based on the method of preparation. Note loans into business and loans repaid (vice versa and we are taling about "capital element here") are neither taxable income nor taxable expense of the trade - its only the "financing costs" that affect your calculation of profits subject to tax (generally speaking here). Example being if 20k loan came in from parents this year and was repaid next year you would ignore 20k in this year and ignore 20k out when calculating you business income and expenses - you would need to ensure these "loans" are not included in either income total or expenses total on the tax return. If you are preparing balance sheet the relevant enties would affect the balance sheet totals. Doh - i have probably made you more confused than before you posted :(

Ray Coman
Posts: 24
Joined: Tue Oct 13, 2009 10:41 am
Location: The Gallery, 14 Upland Road, London, SE22 9EE
Contact:

Re: Sole Trader BBLS for new van

Postby Ray Coman » Sun Oct 11, 2020 12:14 pm

You can claim the AIA for the new van, however consider that if your turnover has been down, you might be better of claiming the capital allowance in a future year. For instance if claiming the AIA brings your total income to below the personal allowance, it would be better to disclaim some of the capital allowance and the carry forward amount can be deduct from profits in a future year. A van is not a car for capital allowance purposes so 18% can be deducted every tax year from the written down value. The written down value is the amount not yet deducted from taxable profits. The balance of written down value (that means AIA and capital allowances not yet claimed) can be deducted if the value of the WDA drops below £1,000. It can also be deducted as a balancing allowance when the van is eventually disposed of. If the trade in value of the van turns out be higher than the WDV, there would be a balancing charge. however if a new van is purchased at that stage, any balancing charge would be offset by AIA on the replacement van.
Raphael Coman, ACCA, CTA
Tax Accountant


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