HOW TO DO DISPOSALS & BALANCING CHARGE

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HOW TO DO DISPOSALS & BALANCING CHARGE

Capital Allowances
How to claim capital allowances

 

DISPOSALS:

If you sell the asset ,give as gift, swap for other item, get compensation from insurance or no longer using for business or start using outside your business &  you originally claimed 100% of the item.

You need to add the full value to your profits in your tax return if  you originally claimed 100% of the item under AIA or First year allowance.

You have nothing in the pool your item qualifies for; This is known as balancing charge.

BALANCING CHARGE;

If you have balance in the pool your item qualifies for, deduct the full value from the pool if you originally claimed 100% of the item. Add the difference to your profits in your tax return if the value of the item is more than the amount in your pool. this is ‘balancing charge’.If there’s a balance left in your pool, you can claim writing down allowance on it.

If you Originally used Writing Down Allowances:

Deduct the value from the pool you originally added the item to if you used writing down allowances.The amount left is the amount you can use to work out your next writing down allowances.For items in single asset pools you can claim any amount that is left as capital allowances. This is known as balancing allowance.

If the value you deduct is more than the balance in the pool, add the difference to your profit. This is balancing charge.

You can only get balancing allowance in your main or special rate pool when you close your business. You can get a balancing charge in any pool in any year.

If you sell it for more than it cost you:

You can only deduct the original cost of item even if you sell it for more. If a connected person sold it to you for less than it cost them, deduct either how much you sell it for or how much it cost them-whichever is smaller & add the difference to your profits in tax return if the value of the item is more than the amount in your pool. This is a balancing charge.

If you close your business:

In the year you close your business, enter the balancing charge or balancing allowance on your tax return instead of claiming capital allowances.

If you need further information how to claim balancing charge or capital allowances for your business, contact us. rubina@pplaccountants.co.uk or visit website to book an appointment https://pplaccountants.co.uk

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