Annual investment allowance and depreciation

Ive just sold my van and when i came to enter it into my basic tax/accounting software it all gets a bit confusing with regards the depreciation

I bought the van in 2009 for £2495 and with an allowable AIA of 100% the cost was all tax deductable, therefore the £800 i have just recieved for it is considered profit for tax purposes. The software however thinks different and with depreciation is telling me only approx £300 is profit

This text is from an article on http://www.centralbusiness.co.uk, which is exactly how i understood the rules

For both Capital Allowance and Annual Investment Allowance, if you sell an asset for more than the Written Down Value (the value after deducting Capial Allowances, First Year Allowances, Annual Investment Allowance and Writing Down Allowance) the difference between the sale figure and the WDV is profit and will be taxable. Since AIA is 100%, the WDV will be zero so anything you sell the asset for will be profit.

it would appear that my software is at fault some how, but thought i best get a second opinion

Replies

Dan Frazer Gardening January 7, 2012 at 8:39pm

So the simplest way to deal with this would be to write down the sale value as an income amount, as if it were a job, paid for and counting towards your taxable income.
PRO

Brian www.mibservices.co.uk January 7, 2012 at 9:12pm

The £800 is taxable as you said, if you dont need the money over the winter, I would go and buy some new kit for the coming season, you then get the benefits of tax relief on the kit and it hasnt cost you anything in real terms.
Paving & Landscaping January 7, 2012 at 9:27pm

When i think about this, i do smile.

www.mibservices.co.uk said:

The £800 is taxable as you said, if you dont need the money over the winter, I would go and buy some new kit for the coming season, you then get the benefits of tax relief on the kit and it hasnt cost you anything in real terms.
Anthony Toop January 7, 2012 at 9:29pm

I probably will do this, just frustrating the software i have is hung up on depreciation when its completely irrelevant :-(

Dan Frazer Gardening said:

So the simplest way to deal with this would be to write down the sale value as an income amount, as if it were a job, paid for and counting towards your taxable income.
Anthony Toop January 7, 2012 at 9:31pm

Indeed its going towards a new van, a 2007 Transit SWB Medium roof T300 110ps with aircon and leccy windows, pick it up on Monday :-)

www.mibservices.co.uk said:

The £800 is taxable as you said, if you dont need the money over the winter, I would go and buy some new kit for the coming season, you then get the benefits of tax relief on the kit and it hasnt cost you anything in real terms.
David Cox January 7, 2012 at 9:36pm

Dont want to throw a spanner in the works - But my Accountant was addamant to the extreme that you Can - NOT use the AIA on a vehicle and there are separate rules in place for vehicles. Also AIA only applies to LTD companies and not to solo traders (which I you are I think? Sorry If Im wrong)
Anthony Toop January 7, 2012 at 9:40pm

AIA is indeed different for cars but not vans

Not sure how AIA works for LTD co but it is definately not solely for them, think your accountant may be a tad confused!!

Have a read here HMRC

David Cox said:

Dont want to throw a spanner in the works - But my Accountant was addamant to the extreme that you Can - NOT use the AIA on a vehicle and there are separate rules in place for vehicles. Also AIA only applies to LTD companies and not to solo traders (which I you are I think? Sorry If Im wrong)
PRO

Gary RK January 7, 2012 at 9:42pm

http://www.businesslink.gov.uk/bdotg/action/layer?r.l1=1073858808&a...

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=108639451...

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=108639256...
PRO

Brian www.mibservices.co.uk January 7, 2012 at 9:51pm

AIA is £50K. You can claim 100% relief on all transport tools plant in the tax year you buy it. Or you can depreciate it over 1 - 5 years if you prefer. All accountanrs have their prefered way if doing things. My account was depreciating all my plant vans tools etc over a 4 year period, until I discovered that. She got bollocked and told to use the £50k limit on every plant investment i made. Lets be honest, very few of us are going to exceed the limit and if like me you purchase new machinery, plant and vans each year then IMO its best to take 100% relief every year.
Anthony Toop January 7, 2012 at 9:58pm

I believe AIA is currently £100,000 but as from April 2012 this will drop to a much lower £25,000

www.mibservices.co.uk said:

AIA is £50K. You can claim 100% relief on all transport tools plant in the tax year you buy it. Or you can depreciate it over 1 - 5 years if you prefer. All accountanrs have their prefered way if doing things. My account was depreciating all my plant vans tools etc over a 4 year period, until I discovered that. She got bollocked and told to use the £50k limit on every plant investment i made. Lets be honest, very few of us are going to exceed the limit and if like me you purchase new machinery, plant and vans each year then IMO its best to take 100% relief every year.