Hi,
I'm confusing the hell out of my self. I have a partnership that is closing down in in year 2 of trading, we claimed capital allowances in the first year of trading for the full cost, so there is no Tax written down balance to carry forward to year 2.
So say they had an item for £500, and claimed This as a capital allowance in year 1, now in year 2 they are closing down, and sell the item for £600, so they make a £100 profit. Even though we have claimed a capital allowance, do we have to pay tax on the profit in year 2?
Really hope that makes sense as it was literally a brain dump.
Thanks
Stuart
yes, there are balancing charges. You are not just paying tax on the profit, you are paying tax on the whole sum received for the sold asset (so effectively repaying the AIA).
If you think about it, if that was not the case people would start companies, buy everything that they wanted, claim AIA on them and then close the companies.
HTH,
Shaun.
-- Edited by Shamus on Wednesday 25th of May 2016 09:36:34 AM
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
more for other people who read this than in answer to yourself as I know that this business is actually selling the asset at a profit. But the other thing to be aware of is that one is expected to sell the assets at market value. Thats to stop people from selling the one year old super duper PC with go faster stripes and 27 inch monitor to their mate a £1.
Remember that you will probably have closing year optional reliefs that can be claimed (Terminal loss relief and relief against total income (which includes an optional claim against chargable gains)).
I'll leave you to look those up but just thought it was worth mentioning them.
Have fun,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Remembering if there is personal usage, the charge / allowance should be scaled - then again assets with personal use should sit in their own section anyway.
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Johnny - Owner of an overly-active keyboard.
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