First years return Help required

jimmo

antjmurray wrote: »

Ok, so if after using the van purchase as AIA gives me a total income figure of say -6k then next year if I made 6k profit I would use that to offset the profit and come out with a figure of 0.

I haven’t got a clue about tax credits but for Income Tax purposes if this is your only source of income you could limit your AIA claim or maybe not even make a claim.
That all depends what your “small” profit is.
Then, next year your assumed £6000 profit would not be taxable anyway. It will be covered by your personal allowance so there would be no need to claim any capital allowances.
Losses carried forward have to be set against the next future profits regardless of the amount and so can be wasted. Capital allowances are optional. You choose whether or not to claim and if so how much to claim. However each year’s claim is limited to 18% of the unused expenditure brought forward.
For AIA see the second paragraph under AIA claims here.
http://www.hmrc.gov.uk/manuals/camanual/CA23085.htm
For Writing down allowances see the final paragraph here.
http://www.hmrc.gov.uk/manuals/camanual/CA23220.htm
Even though your profits may be small it could be worth consulting an accountant.

[Deleted User]

Darksparkle wrote: »

Not saying you are. However tax credits won't see your SA return, they just see that you are declaring no income.

From April 2015, they started doing compliance checks into those not earning at least NMW. More info here - http://www.revenuebenefits.org.uk/tax-credits/guidance/how-do-tax-credits-work/self-employed/

Only giving you a heads up.

Having read the link, it appears that the tax credit rules regarding losses are similar to those regarding tax particularly:

For tax credit purposes, HMRC define self-employed as meaning the self-employed activity is done on a commercial basis with a view to realising a profit

The only reason that the op made a loss was the initial outlay on the ice cream van. He has already indicated that he will utilise this loss in the following year - seems fine to me!

[Deleted User]

jimmo wrote: »

I haven’t got a clue about tax credits but for Income Tax purposes if this is your only source of income you could limit your AIA claim or maybe not even make a claim.
That all depends what your “small” profit is.
Then, next year your assumed £6000 profit would not be taxable anyway. It will be covered by your personal allowance so there would be no need to claim any capital allowances.
Losses carried forward have to be set against the next future profits regardless of the amount and so can be wasted. Capital allowances are optional. You choose whether or not to claim and if so how much to claim. However each year’s claim is limited to 18% of the unused expenditure brought forward.
For AIA see the second paragraph under AIA claims here.
http://www.hmrc.gov.uk/manuals/camanual/CA23085.htm
For Writing down allowances see the final paragraph here.
http://www.hmrc.gov.uk/manuals/camanual/CA23220.htm
Even though your profits may be small it could be worth consulting an accountant.

Yes - some simple tax planning at the outset could benefit in the future. The op should remember that, by claiming 100% AIA initially (when he doesn't need to in tax terms) he will have a balancing charge equivalent to whatever the vehicle realises upon sale. He could be a taxpayer at that point and, no doubt, this will also affect his tax credits.

Darksparkle

[Deleted User] wrote:

Having read the link, it appears that the tax credit rules regarding losses are similar to those regarding tax particularly:

For tax credit purposes, HMRC define self-employed as meaning the self-employed activity is done on a commercial basis with a view to realising a profit

The only reason that the op made a loss was the initial outlay on the ice cream van. He has already indicated that he will utilise this loss in the following year - seems fine to me!

Yes but tax credits won't know that is the reason. They do not see the tax return. They do not deal with the tax side of things.

All they will see is that he has made no profit so that is less than his declared working hours x NMW. That alone will flag to them that a compliance check may be considered.

If you look at the benefit forum, there are hundreds that have received compliance check letters, many in the same circumstances.

They are no longer prepared to support businesses that make little to no profit year in year out. This is also in preparation for UC which will treat people as earning NMW even if they do not.

The OP would then be asked to produce records to prove the work is done on a commercial basis with a view to making a profit and that it is organised and regular.

They may then be happy and the claim continues or they may not be.

I know nothing of the OPs business, I no way am I saying his tax credit claim is genuine or not. I am simply letting him know how tax credits view claims such as this so he is not shocked if a letter from HMRC/concentrix arrives.

antjmurray

Right, after looking at the advice, I have decided to use a small percentage of AIA to take the my profit and loss to zero for the 14/15. For the rest of the van cost am I right in thinking that I can carry it over in the written down allowance and next year onwards I can use 18% of that against any future profits?
Thanks for the advice

[Deleted User]

That would be correct!

antjmurray

One last question as im filling in the return as we speak. Ive used a small amount to put me back to zero in the Annual Investment Allowance column on 4. Fill in Your return online. Do I put the remaining cost of the van in the column that says ''other capital allowances'' and next year I could use 18% of that or do I not put anything and just come up with a return of 0. Basically, do I need to notify them of the pool I want to carry over to next year for WDA

[Deleted User]

If the amount that you are claiming is less than 18% I would put this figure in the capital allowances box and nothing in the AIA. If it is higher, I would do as you suggest. HMRC has no interest in being informed of the pool carried forward - they expect your calculations to be correct.

antjmurray

Thanks for the advice Purdyoaten ive now submitted