Selling assets at a loss.

runningoutoftime

Hello,

I'm new here, and sorry if this is posted in the wrong place.

Just finishing my s/a return for 08/09, and it is all done apart from one thing but do you think I can find the answer anywhere? (and the tax office say they can't ring me back until next week, after the deadline ~ thanks!) The tax office website only gives me answers if I had sold the assets at a profit (CGT).

Anyway, here is my question:

During 07/08, I bought a vehicle solely for business use. I also bought some business equpiment. Both of these were sold during 08/09 at a loss. For example, the business equipment was bought for £6K and sold for £1.5K.

How much can I claim back this year? For example, on the equipment, do I put it down as a £4.5K loss, or do I put the £1.5K down as an income? (I did claim the £6K the year before as an expense).

Finally, where on my on-line s/a form do I enter these details? I just can't see anywhere to put it!

I hope someone can help please, as this is the last thing I need to do for my return, but I'm running out of time!

Thanks!

fengirl_2

The £6k from the previous year should have been included in a capital allowances claim, not a business expense. You have therefore made an incorrect return.
You have two choices: amend the 07-08 return and pay the extra tax and interest and then do the sums properly for 08-09, or forget the whole thing and save yourself the hassle.

runningoutoftime

Ok, thanks.

When I said it had gone down as an expense, I'm not totally sure HOW it went down on the return (my wife did my return, I need to ask her).

If it went down correctly, as a capital allowances claim (I will need to check), how to I deal with the sale this year please?

You say 'forget the whole thing'. Are you saying I shouldn't put the £1.5k received down anywhere on the return?

Thanks.

fengirl_2

If the £6000 was claimed as a revenue expense, you will have received tax relief of £6k @ 20% = £1200.
If the items were correctly treated as capital, you will have received an allowance of 20% x £6000 = £1200, giving tax relief of £1200 @ 20% = £240.00
The latter is the correct way to do it, so if you did it the first way, you have underpaid tax by £1200 - £240.
If the claim was correctly made, the brought forward value of the items will be (6000-1200) 4800.
The items were sold for £1500 and you have had relief of £1200, so you have made a profit of £300 which is added to capital allowances. You dont include the actual proceeds form the sale any more than you include the cost of the purchase in your accounts.
If this has been done incorrectly, I suggest you forget the whole thing as its a complicated matter for you to deal with without professional help.

mikey72

Surely an asset brought forward at £4800 and sold at £1500 is a loss of £3300 to the business?

fengirl_2

No, because the original purchase is not recognised as a cost. Only capital allowances can be claimed on equipment.

Pennywise

fengirl wrote: »

The items were sold for £1500 and you have had relief of £1200, so you have made a profit of £300 which is added to capital allowances. You dont include the actual proceeds form the sale any more than you include the cost of the purchase in your accounts.

I think everyone's getting confused here.

Basically, you have to compare the tax written down value with the proceeds. If you claimed capital allowances on the £6k last year, there is a written down value of £6k less the amount claimed brought forward, so if you claimed say 50% FYA, i.e. £3k, its written down value is £3k, so when you sell it for just £1.5k, you have a balance of allowances to claim of £1.5k. I.e. it cost £6k, you get back £1.5k, so somewhere along the line you claim tax relief on £4.5k. If you claimed the full £6k last year, then you are probably wrong and it needs correcting.

To give you an answer, we need to know what you claimed and how you claimed it last year.

runningoutoftime

OK, thanks. I left it off!