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Where Taxpayers and Advisers Meet

Disposal of my work van

davisplastering
Posts:3
Joined:Sun Feb 28, 2021 5:29 pm
Disposal of my work van

Postby davisplastering » Sun Feb 28, 2021 5:34 pm

I am a sole trader and I purchased an MWB van for my business in 2018/19 for £10,000. The use is 90:10 business-to-personal, and I claimed £9,000 as an AIA at the time.

The van I bought is too small, and I need a larger one. I plan to keep the small van and use it for personal use. What is the procedure for disposing of the van from my business in my accounts?

I estimate that the current value of the van to be £5,000-6,000.

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

Re: Disposal of my work van

Postby robbob » Sun Feb 28, 2021 6:31 pm

You will have a balancing charge for 90% of disposal proceeds presuming private use is still 10% - this figure is added to your income hopefully there will be a new AIA claim to limit the damage :)

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Disposal of my work van

Postby bd6759 » Sun Feb 28, 2021 7:12 pm

Or keep it in your business and use it occasionally. No balancing charge to worry about.

davisplastering
Posts:3
Joined:Sun Feb 28, 2021 5:29 pm

Re: Disposal of my work van

Postby davisplastering » Mon Mar 01, 2021 10:05 am

Hi both, thank you for the replies.

Excuse my ignorance but I want to make sure I do this correctly. So if I were to keep it in my business, but the use change from 90:10 (in favour of work), down to 10:90 although I claimed 100% AIA in year 1, that's not a problem and I don't need to make any adjustments in my self-assessment and can carry along and buy a second van?

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Disposal of my work van

Postby bd6759 » Mon Mar 01, 2021 6:48 pm

Yes. A balancing charge only arises when the asset pool is empty of the trade ceases.

Your van is in a single asset pool, with allowable expenditure of 0. (Because you claimed it all under AIA).

When you dispose of the van, you will have a balancing charge of the difference between 0 and its value at that time. the charge is restricted to the business proportion. So if you sell it now for £6000, you will have a balancing charge of £5400.

If you keep it in your business, you haven't disposed of it, and wont have a balancing charge.

When you eventually do dispose of it, it will be worth less (it might even be worthless) so a smaller balancing charge. If it is worth anything the balancing charge will be restricted by the average business/private percentage over the life of the van.

davisplastering
Posts:3
Joined:Sun Feb 28, 2021 5:29 pm

Re: Disposal of my work van

Postby davisplastering » Wed Mar 03, 2021 1:43 pm

Thanks! To clarify on
If it is worth anything the balancing charge will be restricted by the average business/private percentage over the life of the van.
Year 1 90:10 work:personal (£9k of £10k cost claimed under AIA)
Year 2 50:50 work:personal
Year 3 10:90 work:personal

Disposed of in year 3 at a value of £5,000. What balancing charge would I be putting down? My average over the three years would be 50:50, would I put a balancing charge of £2,500 down? surely that means I pay less tax on it, even though I claimed 90% of the cost to the business?


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