If someone has purchased assets of £20k and they have a profit of £10k would you claim AIA for the £10k and let the rest carry forward. Can the remaining £10k be used as AIA the following year assuming a similar profit, or would it have to be written down at 18% per annum?
Looking on HMRC I can see you have to use WDA for the balance if the assets exceed the AIA but can't find anything that explains my scenario.
1. Claim AIA of £10k leaving £0 taxable and carry £10k TWDV forward. You can only claim AIA in the year the asset is bought so would be left to claim 18% WDAs if that is the appropriate rate for the assets.
2. Claim AIA of £20k leaving a £10k taxable loss then depending on other income could either offset against other income the year, carry back or carry forward. All this depends on whether is a Ltd co or Sole trader which you havent said. If a £10k loss and you are carrying forward and you choose to use and it is a sole trader then it is an all or nothing claim which may mean you lose some of the personal allowance next year.
Thanks Mark. I am thinking more for a Ltd Co so claim 20k and forward a 10k loss which can then be offset against the 10k profit in year 2, resulting in no tax year 2. Have I understood that correctly?
