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

Dealing with sale of allowable expenses

nlbamo
Posts:1
Joined:Sat Jan 02, 2021 6:44 pm
Dealing with sale of allowable expenses

Postby nlbamo » Sat Jan 02, 2021 7:29 pm

This is my first post so, hello! and please accept my apologies if my opening query is as daft as I expect it may be! I've been a sole trader for a few years and during that time I've purchased necessary equipment such as a laptop, monitor, accessories and software (both on disk and via annual subscription). As I'm only a small-time freelancer I've filled out my self assessment tax form myself, initially using the older accrual basis and then more recently using the Cash Basis. I'd thought I had a handle on it all but whilst filling out this years I suddenly realised I have potentially been making a daft mistake.

When I first completed a self assessment I was advised by someone I trusted that I should claim for Capital Allowances (such as a computer purchase) over 3 consecutive years until the items value was all eaten up (eg. £600 computer split into 3 yearly claims of £200). I asked them what I should do if I sold or gave the PC away five years after purchasing it (so two years after the three years capital allowance period 'completed') and I was assured I didn't need to declare the sale as the original three years was up.

I recently switched to the Cash Basis and when reading the Gov documents it suggests that it's necessary to declare a gifting or sale of any item claimed as a Business Expense no matter how long it's been owned and used by the business. And if that's correct I'm wondering if it has always been necessary to declare any gifting or sale of a business expense/capital allowance however many years the item has been owned and used by the business, whether using the older Accrual Method or the newer Cash Basis?

I'm concerned I've been misled in the past and may now need to go back and rebalance things. I've searched for the answer for some time but haven't been able to confirm, and I would really appreciate some advice from those in the know! Many thanks

bd6759
Posts:4256
Joined:Sat Feb 01, 2014 3:26 pm

Re: Dealing with sale of allowable expenses

Postby bd6759 » Mon Jan 04, 2021 12:01 am

Yes. The value of assets taken out of the business should’ve have been added to the capital allowance pool, but you didn’t pool the assets either.

If all we are talking about is a £600 laptop which would probably have negligible value when given away, there isn’t much too worry about.


Return to “Business Tax”