Last year client introduced two vehicles, one at £1600 one at £1100 and depreciated them for the 6 months the business had been trading, so b/f figures were £2700 FA and £270 depreciation
The £1600 vehicle has now been been taken out of the business so I have done the journal as follows
Credit: FA vehicles b/f £1600
Debit: Directors a/c £1440
Debit: Depreciation b/f £160
This has changed the figures on this years accounts so I only have the one vehicle FA vehicles b/f £1100 Depreciation b/f £110
I assume this is correct and I have understood doing the journal correctly?
Tax Filer is telling me I have the following error as attached, so maybe not?
-- Edited by Leger on Wednesday 30th of November 2016 04:16:53 PM
Cr motor vehicles (FA cost account) 1600.00 Debit disposals account Dr accumulated depreciation 160.00 Credit disposals account DR Bank re sale proceeds £xx Credit disposals account Difference is the profit or loss on sale of vehicle.
EG sale proceeds £1000.00 So balancing figure for disposals account is £440 which is the loss on disposal. This would be a credit to the disposals account, therefore a debit to your P&L account.
Reduces profit.
Profit on disposal - increases overall profit.
HTH
-- Edited by Cheshire on Wednesday 30th of November 2016 04:31:29 PM
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Thanks for your help here Joanne, I do appreciate it.
The vehicle wasn't actually sold, it was retired as a taxi and given to his son. It was estimated at £1600 when it was introduced on start of trading and depreciated by £160 6 months later at year end. The car was retired 3 months later. To keep things tidy and not necessarily risking creating a false loss on disposal I've done a no gain no loss sale. The client is happy with that.
Attached is the new journal based on your second post but your wording is slightly different to the wording on the journal. Can you please confirm whether I've got it correct and if not tell me which drop down bit I need?
-- Edited by Leger on Wednesday 30th of November 2016 05:28:42 PM
Your entry (in isolation) effectively creates an overdrawn DLA, which the Director than has to repay. Yet the fact that he could potentially gain some tax benefit of a loss on disposal of £1440 does seem wrong given that the car has been moved into the business and 9 months later moved out again, so I think its probably the best course of action. Would certainly love to hear other opinions on this one. Other issue (perhaps) is what happened with any cap allowances and therefore any adjustments to be made?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Joanne's point aside and looking back at the error given by Tax Filer and the date of that journal: Would I be guessing correctly that the business year end is 30th September?
Because what Tax Filer appears to be telling you is that your opening balances for one year on those two accounts are in disagreement with your closing balances for the previous year - so I'm guessing you're making the journal on the closing date of the year that has already been completed. Would it not be more practical for it to be the first day of the following year? i.e. 1st October 2015.
(Bearing in mind that other than VAT I don't touch taxation at all.)
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
Your entry (in isolation) effectively creates an overdrawn DLA, which the Director than has to repay. Yet the fact that he could potentially gain some tax benefit of a loss on disposal of £1440 does seem wrong given that the car has been moved into the business and 9 months later moved out again, so I think its probably the best course of action. Would certainly love to hear other opinions on this one. Other issue (perhaps) is what happened with any cap allowances and therefore any adjustments to be made?
Hi Joanne
Under HMRC rules you have to account for a disposal at market value, even if you give it away, so I'm happy with the action I've taken.
It was written down at 8% so last year I claimed Cap Allowance of £64 (6 months) and the remaining WDA allowance was above the disposal
Hi Vince
That date is the month it was disposed of so year end is June 16
I've sorted it now on Tax Filer. I misunderstood the instructions I followed when I first did it, and put the FA cost to b/f instead of disposal cost. plus I'd also missed out a step as well (thanks Joanne for explaining it better)
-- Edited by Leger on Wednesday 30th of November 2016 11:29:39 PM
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
