AIA Asset Disposal - Balancing Charge Calculation

staffsuk

Hi all!

I’m a sole trader, not VAT registered.

I bought a new phone and computer in the tax year 20 / 21. The phone cost £370 and the computer cost £1200. I worked out usage for the phone at 50% business, 50% personal, and the computer 60% business, 40% personal. From that I calculated a figure of £185 (phone) + £720 (computer) totalling £905, which I claimed in full as AIA in my tax return for that year.

I’m now looking to replace my computer. As I understand it, this will give rise to a balancing charge which will need to be entered in my tax return. Would this balancing charge simply be 60% of the net proceeds? AFAIK there would be no WDA / depreciation taken into account with an asset for which AIA was claimed?

I would then claim 60% of the purchase cost for my new computer as AIA in the return, as I did before.

Thanks!

Jeremy535897

If you sell the old computer and buy the new computer in the same tax year, you claim (in your case) AIA on 60% of the new computer less 60% of the proceeds for the old computer. You would only calculate a balancing charge if you sold the old computer in one tax year and bought the new one in the next tax year.

[Deleted User]

Jeremy535897 said:

If you sell the old computer and buy the new computer in the same tax year, you claim (in your case) AIA on 60% of the new computer less 60% of the proceeds for the old computer. You would only calculate a balancing charge if you sold the old computer in one tax year and bought the new one in the next tax year.

Bought in 2020/21. The op is correct, as in your second paragraph.

Jeremy535897

purdyoaten2 said:

Jeremy535897 said:

If you sell the old computer and buy the new computer in the same tax year, you claim (in your case) AIA on 60% of the new computer less 60% of the proceeds for the old computer. You would only calculate a balancing charge if you sold the old computer in one tax year and bought the new one in the next tax year.

Bought in 2020/21. The op is correct, as in your second paragraph.

It's not when it's bought that matters. it's when it's sold. I assume OP still has it.

[Deleted User]

Jeremy535897 said:

purdyoaten2 said:

Jeremy535897 said:

If you sell the old computer and buy the new computer in the same tax year, you claim (in your case) AIA on 60% of the new computer less 60% of the proceeds for the old computer. You would only calculate a balancing charge if you sold the old computer in one tax year and bought the new one in the next tax year.

Bought in 2020/21. The op is correct, as in your second paragraph.

It's not when it's bought that matters. it's when it's sold. I assume OP still has it.

I would have hoped that you knew that I was aware of that. 

The only tiny point that I was making was that the bulk of your reply dealt with buying and selling assets in the same year when the op bought it in 2020/21.

Jeremy535897

[Deleted User] said:

Jeremy535897 said:

purdyoaten2 said:

Jeremy535897 said:

If you sell the old computer and buy the new computer in the same tax year, you claim (in your case) AIA on 60% of the new computer less 60% of the proceeds for the old computer. You would only calculate a balancing charge if you sold the old computer in one tax year and bought the new one in the next tax year.

Bought in 2020/21. The op is correct, as in your second paragraph.

It's not when it's bought that matters. it's when it's sold. I assume OP still has it.

I would have hoped that you knew that I was aware of that. 

The only tiny point that I was making was that the bulk of your reply dealt with buying and selling assets in the same year when the op bought it in 2020/21.

Sorry, but I think you are missing the point. OP is likely to sell old computer and buy new computer in, say, 2023/24. There will be no balancing charge, just AIA on the difference between the cost of the new computer and the proceeds of the old computer.

[Deleted User]

Jeremy535897 said:

purdyoaten2 said:

Jeremy535897 said:

purdyoaten2 said:

Jeremy535897 said:

If you sell the old computer and buy the new computer in the same tax year, you claim (in your case) AIA on 60% of the new computer less 60% of the proceeds for the old computer. You would only calculate a balancing charge if you sold the old computer in one tax year and bought the new one in the next tax year.

Bought in 2020/21. The op is correct, as in your second paragraph.

It's not when it's bought that matters. it's when it's sold. I assume OP still has it.

I would have hoped that you knew that I was aware of that. 

The only tiny point that I was making was that the bulk of your reply dealt with buying and selling assets in the same year when the op bought it in 2020/21.

Sorry, but I think you are missing the point. OP is likely to sell old computer and buy new computer in, say, 2023/24. There will be no balancing charge, just AIA on the difference between the cost of the new computer and the proceeds of the old computer.

Completely agree. For some reason I had implanted in my brain that you were talking about purchasing a laptop and selling it later in the same tax year. 

staffsuk

Thanks

@Jeremy535897 that makes sense.

So as an example outcome for disposing of my old computer and purchasing a new computer in this tax year 23/24:

Used computer net sale proceeds = £700

60% business use = £420

New computer cost = £1400

60% business use = £840

£840 less £420 = £420

So I would make a AIA claim in my 23/24 tax return for £420

Is that correct?

Jeremy535897

[Deleted User] said:

Jeremy535897 said:

purdyoaten2 said:

Jeremy535897 said:

purdyoaten2 said:

Jeremy535897 said:

If you sell the old computer and buy the new computer in the same tax year, you claim (in your case) AIA on 60% of the new computer less 60% of the proceeds for the old computer. You would only calculate a balancing charge if you sold the old computer in one tax year and bought the new one in the next tax year.

Bought in 2020/21. The op is correct, as in your second paragraph.

It's not when it's bought that matters. it's when it's sold. I assume OP still has it.

I would have hoped that you knew that I was aware of that. 

The only tiny point that I was making was that the bulk of your reply dealt with buying and selling assets in the same year when the op bought it in 2020/21.

Sorry, but I think you are missing the point. OP is likely to sell old computer and buy new computer in, say, 2023/24. There will be no balancing charge, just AIA on the difference between the cost of the new computer and the proceeds of the old computer.

Completely agree. For some reason I had implanted in my brain that you were talking about purchasing a laptop and selling it later in the same tax year. 

No problem. It happens to the best of us!

Jeremy535897

staffsuk said:

Thanks

@Jeremy535897 that makes sense.

So as an example outcome for disposing of my old computer and purchasing a new computer in this tax year 23/24:

Used computer net sale proceeds = £700

60% business use = £420

New computer cost = £1400

60% business use = £840

£840 less £420 = £420

So I would make a AIA claim in my 23/24 tax return for £420

Is that correct?

Yes, that's right.