Hi all, what is the best way to do this. My client started business in February 2011. Only done a couple of jobs before 5 April 2011. Needs to fill in a tax return. Bought lots of tools etc before trading and also a few larger assets. Am I correct in saying that the small tools will have to be put in 2010/11 books resulting in a loss. But what about the larger tools. Normally reclaim as AIA. Help please.
Personally, I would put the small tools in the account and claim the full AIA on the large tools.
If a loss has been created then there is a lot of flexibility in getting relief for those losses including taking it back three years against total income.
Following on from what Trueman Brown said, you have a bit of flexibility with the capital allowances, which depends upon the circumstances of the client as to the best way to go. For instance, you may create a loss and carry back, but this may result in the personal allowance for the 2011 tax year being wasted. So tread with care.
My client has used all his personal allowance up, as also employed.
If I was to not claim any AIA this year. If the full balance of the assets were carried forward would I then put 20% WDA as a capital allowance the following year if a profit is made etc.
The only other income my client has is employment income.
If I was to not claim any AIA this year. If the full balance of the assets were carried forward would I then put 20% WDA as a capital allowance the following year if a profit is made etc.
The only other income my client has is employment income.
Re AIA, yes you can only claim AIA in the year of purchase.
And you can offset s/e loss against employment income, so may be worth thinking about taking the AIA to create a bigger loss and getting a bigger tax refund.
Remember if you create a trading loss in the first four years of trading you can take it back three years against total income of that year (earliest year first).
My client has only paid employment tax. It works out that if I create a loss by claiming the tools etc before trading then he gets all the tax back on that employment. Am I on the right track? Losses very complicated.
His loss and personal allowance add up to more than his employment income by about £300!
I don't know what sort of figures you are talking about - but remember that if he only traded for 2 months of the tax year you can only claim 2/12's of the AIA allowance.
