Claiming back for an asset

2_yorkies

Hello you clever folk. I'm trying to help a friend do his self employed tax assessment but have a mental block.
He pays 20% tax on most of his earnings as in construction and then has to claim it back.
In the latest tax year he purchased a van for more money than he has paid tax so can someone tell me how we claim for the van please?
Thank you

[Deleted User]

How does he claim his tax back? Does he prepare a set of accounts and declare on a self assessment tax return? That would be the only way to 'claim' the van cost.

2_yorkies

Yes he does

[Deleted User]

He would claim up to the full cost of the van under capital allowances (AIA), provided, of course, it is used for his business. Without any details of his profit it is difficult to elaborate further.

chrismac1

When calculating his taxable turnover, remember to gross up if your starting point is receipts. So if receipts are £10,000 then turnover is £12,500 plus the cost of any materials within his sales. This is the most common error made within CIS self-assessment returns.

[Deleted User]

chrismac1 wrote: »

When calculating his taxable turnover, remember to gross up if your starting point is receipts. So if receipts are £10,000 then turnover is £12,500 plus the cost of any materials within his sales. This is the most common error made within CIS self-assessment returns.

Obviously from experience. :rotfl: You are so so correct!

2_yorkies

Gross income 19000, materials, expenses etc 4500, leaves 14500 van cost 6345

[Deleted User]

Ah - so you have an issue. Claim £4500 on the van - this reduces the profit to 10000 which would be covered by personal allowances - no tax due. All of the tax deducted under SC60 (or whatever it is called now) will be refunded.

Carry forward the balance of £1845 and claim 18% of that on a reducing balance each year hence.

(All assuming that your friend has no other income of course!)

2_yorkies

You're a star thank you so much

Cook_County

Is there any private use of the van?

Pennywise

[Deleted User] wrote:

Ah - so you have an issue. Claim £4500 on the van - this reduces the profit to 10000 which would be covered by personal allowances - no tax due. All of the tax deducted under SC60 (or whatever it is called now) will be refunded.

Carry forward the balance of £1845 and claim 18% of that on a reducing balance each year hence.

(All assuming that your friend has no other income of course!)

If the tax return is being done on the "simplified cash basis", I don't think you're allowed to restrict your capital allowance claim and carry the balance forward. I think you have to deduct the entire cost of capital asset purchases as an expense, thus it would reduce his taxable profit below the personal allowance and so some potential tax relief would be wasted. Although, the good thing is it would reduce the profits for NIC purposes so the class 4 NIC would be less even if there's no income tax relief on the excess.