This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Asset purchased and disposed of in same financial year

Loo
Posts:12
Joined:Wed Aug 06, 2008 4:09 pm

Postby Loo » Mon Oct 27, 2008 7:01 pm

Is an asset purchased and disposed of in the same financial year resulting in a £1,000 loss allowable for tax purposes? It cost £3,500 to purchase. Can the income and expenditure be shown in the P&L whilst there is no capital allowance claimed and no year end depreciation charged? Or should it be shown as a capital loss on the CT computation? It was disposed of due to a change in production.

Thanks in advance.

Simon Sweetman
Posts:1690
Joined:Wed Aug 06, 2008 3:11 pm

Postby Simon Sweetman » Tue Oct 28, 2008 8:46 am

Assuming that it qualifies as plant and machinery (and it was used for the trade) then there is a balancing allowance of £1000 available.

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Postby robbob » Tue Oct 28, 2008 8:50 am

Hi Loo

The asset would still be shown as an addition and disposal on the fixed assets on the balance sheet.

All that would show up on the P&L is the loss on disposal, which will be the same as the balancing allowance available for tax purposes.

Loo
Posts:12
Joined:Wed Aug 06, 2008 4:09 pm

Postby Loo » Tue Oct 28, 2008 9:37 am

It was never actually used (but the intention was to use it). It was actually given to the director who sold it into his business. Would this still be allowable?

Thanks for your help.

Simon Sweetman
Posts:1690
Joined:Wed Aug 06, 2008 3:11 pm

Postby Simon Sweetman » Tue Oct 28, 2008 9:51 am

The Act requires that "it is capital expenditure on the provision of plant or machinery wholly or partly for the purposes of the qualifying activity carried on by the person incurring the expenditure" so probably not. Also the loss presumably depends on a valuation put on it when it was given to the director. This can only really be answered authoritatively with full details of the transactions.

Loo
Posts:12
Joined:Wed Aug 06, 2008 4:09 pm

Postby Loo » Tue Oct 28, 2008 11:04 am

The assets were purchased by the ltd company from the director at less than market value in April 2007 (£3325.00). They were actually used until Dec 07 (sorry, I have confirmed they were used). Changes to production meant they were no longer required so they were sold on to another company who offered £2250.00 and the director settled for this amount. I think this is allowable but a 2nd opinion would be really appreciated.

Thanks for your help.

Simon Sweetman
Posts:1690
Joined:Wed Aug 06, 2008 3:11 pm

Postby Simon Sweetman » Tue Oct 28, 2008 5:00 pm

If the asset was actually used, then yes there is a balancing allowance due (technically using the market value when they ceased to be used). Strictly the purchase cost should be market value as they were bought from a connected person, but that might of course mean more tax for the director.


Return to “Business Tax”