Defer capital allowance claim?

KellyJ

I’m self-employed and am completing my 80/09 self-assessment tax. My total income from all sources (after expenses) is about £5,000, less than my Personal allowance of £6,035, so I will not be liable for any tax.

I haven’t yet included a claim for capital allowances, as the equipment I purchased during 08/09 totals only about £400 in value, and the pool brought forward from 07/08 is about £50. A capital allowances claim of £450 will not produce a loss for my business, so there seems no point in claiming it.

As I understand it, claims for capital allowances must be made in the same year the equipment was purchased, and that such claims can’t be deferred to the next tax year (when they may be more beneficial).

I’m looking for confirmation that my understanding is correct, or if anyone can advise me otherwise.

KellyJ

Money_Grabber13579

No you don't have to claim any capital allowances if it is not beneficial to do so. This means that the higher value is carried forward, and can be claimed in future years.

Pennywise

Just remember that you'll only be able to claim writing down allowance (usually 20% of pool brought forward) and not the 100% AIA which is only available in the year of purchase. In your case, it sounds as if this point doesn't really matter, but I thought it useful to mention for others reading this post.

KellyJ

Money_Grabber:

> No you don't have to claim any capital allowances if it is not beneficial to do so.

Understood.

> This means that the higher value is carried forward, and can be claimed in future years.

Don't understand this! What do you mean by 'higher value is carried forward', in my case.

Am I correct that if I don't claim the £400 capital equipment (purchased in 08/09) in my 08/09 tax form, that I can't claim it in 09/10?

KellyJ

KellyJ

Pennywise: Thanks.

Money_Grabber13579

KellyJ wrote: »

> This means that the higher value is carried forward, and can be claimed in future years.

Don't understand this! What do you mean by 'higher value is carried forward', in my case.

Am I correct that if I don't claim the £400 capital equipment (purchased in 08/09) in my 08/09 tax form, that I can't claim it in 09/10?

KellyJ

Ok, all this means is that the value of your pool will be higher in future years i.e. instead of £50, it will be £450, of which all or none of this could be claimed in future years.

You will be able to claim the full £400 in future years if you wish, because the total value of the pool is less than£1000.

KellyJ

Money_Grabber:

Ah, I've learned something new today - thanks!

So, in general, when completing a tax form, I'm not obliged to claim either [a] writing down allowance (say 20%) of what's remaining in my pool, nor any new equipment (via AIA). Instead, I can omit all capital allowance claims, and enter a claim in subsequent years, when hopefully they will be more beneficial.

> You will be able to claim the full £400 in future years if you wish, because the total value of the pool is less than £1000.

I suppose this assumes HMRC continue with the new AIA allowance!

Pennywise said:

> you'll only be able to claim writing down allowance (usually 20% of pool brought forward) and not the 100% AIA which is only available in the year of purchase.

At first I thought this means I won't be able to claim 100% of the £400 next year. But, next year it will be in the pool, so won't be allowable under AIA then anyway.

So, I think you and Pennywise are in agreement.

Next year, will the £400 + £50 go in box 23 "Allowance for small balance of unrelieved expenditure", or in box 24 "Other capital allowance" (whether or not there will be something to include in box 22 "AIA"?

Money_Grabber13579

As long as the value of the general pool remains under £1000, you can claim the entire amount, as this saves you from carrying forward stupidly small amounts into future years.

An example is probably the best way to explain! Say next year you spent a substantial amount on new equipment (i.e. £20,000, then that would be eligible for AIA in that year. However, if it wasn't beneficial to claim the £20,000 in capital allowances via AIA, then you could just add it to the value of the pool. But this would mean in future years, you would only be able to claim 20% of the value of the pool (because it is more than £1000 and the expenditure didn't take place in that year)

In your case, the figure of £450 would go into box 23 as you are allowed to claim it all since it is a small balance. AIA is only allowable for the year in which the expenditure is incurred. (That's probably even muddier than when I started!)

KellyJ

Money_Grabber:

> That's probably even muddier than when I started!

No, you've done a very good job in explaining!

Just a final observation. Where a large pool (over £1,000) is carried forward, then when claiming a 20% annual allowance for it in the next tax year, the amount is entered in box 24, "Other capital allowances", if I've understood HMRC notes correctly.

Thanks,
KellyJ

Money_Grabber13579

Yep, that would be correct. Box 24 includes the annual 20% allowance.

KellyJ

Thanks Money_Grabber!