Selling assets after cessation of business

TrulyMadly

Can anyone give some advice please. My husband and I are closing down our business. He is taking early retirement and I am working full time elsewhere. After the end of our trading year we sold a van for £6K +VAT. The VAT was paid. What I am wondering is how the £6K will be treated by the taxman. Does it come in as profit?
Thank you

prowla

Your income is profit and your outgoings are losses; the P&L accounts should give the overall balance, which is what the taxman is interested in.

Dangermac

prowla wrote: »

Your income is profit and your outgoings are losses; the P&L accounts should give the overall balance, which is what the taxman is interested in.

I'm no accountant, but I dont think that this is correct.

The purchase of 'capital items' dont normally sit on the Profit & Loss Account. Normally they sit on the balance sheet, and then a depreciation amount is added to the Profit & Loss, in order to act as gradual expenditure.

Because this is a sale, I would imagine that there would need to be some sort of depreciation/disposal adjustment showing on the accounts (Profit & Loss and/or Balance Sheet).

As I say, I'm no accountant, but I believe the above info to be fairly accurate.

DM

antrobus

TrulyMadly wrote: »

Can anyone give some advice please. My husband and I are closing down our business. He is taking early retirement and I am working full time elsewhere. After the end of our trading year we sold a van for £6K +VAT. The VAT was paid. What I am wondering is how the £6K will be treated by the taxman. Does it come in as profit?
Thank you

On the assumption that the van was an asset of the business, and that you claimed capital allowances on the purchase of said van, then yes, the £6k is taxable. Whether all of it or only some of it is taxable would depend on your exact position as regards capital allowances. Do you have an accountant who deals with/dealt with the tax affairs of the business?

TrulyMadly

Thank you so much for your replies. I think it will be taxable too. Meeting our accountant next week but forewarned is forearmed as they say!

firstinflight

There's a few different factors at play here, but it breaks down like this:

Assuming the van was used as an asset of the business rather than trading stock (i.e. your business was not in buying and selling vans), the proceeds will not count as trading income, and so will not form part of taxable profits.

Unless you've sold the van at a profit over what you paid for it, there won't be any capital gains tax, however if you've claimed capital allowances, there might be a balancing charge, if the sales price was higher than the tax written down value. On the other hand, if you've sold it for less than the tax value, then you might be due a tax credit on the difference.

TrulyMadly

First in flight. What a comprehensive answer. Thank you