Capital allowances - disposal/cease trading

Supernova

Hi all,

Just a couple of quick questions regarding Capital Allowances:

1. Say, I bring a personally owned item into my business. I bought it second hand some years ago and it has appreciated in value and may continue to do so.

I understand I have the choice of bringing it in for what it cost me originally or the market (eBay?) value. If I sell or keep it in the future when trading ceases HMRC say to 'deduct only the amount you originally paid' from the appropriate pool. Is my understanding correct?

2. In general does 'market value' take into account the condition of the item?

3. If a capital item stops working and essentially becomes worthless, how is disposal declared?

Thanks!

[Deleted User]

Restricted to cost is the term that you are looking for. I note that you have not stated what the asset is. It is unusual for an asset upon which capital allowances are claimed to appreciate - only examples that I have dealt with in the past are fishing boats.

2) In such a case you really should seek an independent valuation to ascertain the market vale

3) Sale price NIL?.

Supernova

[Deleted User] wrote:

Restricted to cost is the term that you are looking for. I note that you have not stated what the asset is. It is unusual for an asset upon which capital allowances are claimed to appreciate - only examples that I have dealt with in the past are fishing boats.

2) In such a case you really should seek an independent valuation to ascertain the market vale

3) Sale price NIL?.

Thank you.

In this case the item is a musical instrument, a vintage guitar bought for £200 now probably worth over £1000.
To keep it simple presumably I could bring it in at £200 and dispose of it for the same eventually?

Or get a written valuation, bring it in at that value and dispose of at £200 or a valuation at that time in the future?

[Deleted User]

If it is not worth £200 you cannot use this figure. Why bother claiming capital allowances at all? If you bring it in at, say, £500 you will probably want to claim the whole figure in your first year. There would be no value carried forward. If you cease business and you take it out at £500 you will have a balancing charge of £500 (negative capital allowance of £500). Seems pointless to me.

Supernova

[Deleted User] wrote:

If it is not worth £200 you cannot use this figure. Why bother claiming capital allowances at all? If you bring it in at, say, £500 you will probably want to claim the whole figure in your first year. There would be no value carried forward. If you cease business and you take it out at £500 you will have a balancing charge of £500 (negative capital allowance of £500). Seems pointless to me.

Thanks. Yes, trying to make sense of any documentation and work out if it's worth it.

I was told that bringing capital in at a cost for which I at least have a receipt might make sense. Most items will have depreciated though, but not in this case. So you are saying current 'market value' is the norm?

I think that the HMRC quote I used above applies to the pool but if I did sell there would be the full proceeds declared as income too.

I guess whether it is sensible to use the allowance and the subsequent disposal depends on the profit/loss figures at the time too.