Self Assessment Accounts Question re Vehicle Written Off.

Jeremy535897

Maharishi said:

Jeremy535897 said:

The first question is whether you use the cash basis. I assume not, as otherwise you would have no pool brought forward.
On that basis, as the van won't be in a special pool, the mere fact that it is the sole asset left is irrelevant: you deduct the £40 or whatever the scrap value is from the pool brought forward, and claim WDA if you need it on the balance.
See: https://www.gov.uk/government/publications/capital-allowances-and-balancing-charges-hs252-self-assessment-helpsheet/hs252-capital-allowances-and-balancing-charges-2021
"You take balancing allowances off your taxable profits. You only get a balancing allowance in the main or special rate pool when you stop your business. You can get a balancing allowance in a single asset pool when you sell or dispose of the asset that is in it."
However, assuming the balance in the pool is £1,000 or less, you can claim the balance whenever you like.
"You can write off all the balance in your main pool or the special rate pool when your pool’s value is £1,000 or less before you work out the WDA. This is called a small pools allowance. You claim this instead of claiming a WDA."

Are you saying that Ferro gave me the wrong advice?  This is confusing and, no, I don't use cash basis.  I have always had a pool for the vehicle and other equipment purchases.  I have only claimed my entitled WDA on 4 or 5 of the last 10 trading years due to abysmally low profits which meant that there was no value claiming further allowances when I already had no tax liability.  So, I will have no van but cannot claim the residual value, as a loss, in one go?  My current pool is around £3200 all in, so ...

Thanks - and I did go read the linked document, which further depressed me.

You can only take a balancing allowance on a general pool when the trade ceases, but if you sell an asset for the pool balance or more, the pool will reduce to nil.

Maharishi

Jeremy535897 said:

Maharishi said:

Jeremy535897 said:

The first question is whether you use the cash basis. I assume not, as otherwise you would have no pool brought forward.
On that basis, as the van won't be in a special pool, the mere fact that it is the sole asset left is irrelevant: you deduct the £40 or whatever the scrap value is from the pool brought forward, and claim WDA if you need it on the balance.
See: https://www.gov.uk/government/publications/capital-allowances-and-balancing-charges-hs252-self-assessment-helpsheet/hs252-capital-allowances-and-balancing-charges-2021
"You take balancing allowances off your taxable profits. You only get a balancing allowance in the main or special rate pool when you stop your business. You can get a balancing allowance in a single asset pool when you sell or dispose of the asset that is in it."
However, assuming the balance in the pool is £1,000 or less, you can claim the balance whenever you like.
"You can write off all the balance in your main pool or the special rate pool when your pool’s value is £1,000 or less before you work out the WDA. This is called a small pools allowance. You claim this instead of claiming a WDA."

Are you saying that Ferro gave me the wrong advice?  This is confusing and, no, I don't use cash basis.  I have always had a pool for the vehicle and other equipment purchases.  I have only claimed my entitled WDA on 4 or 5 of the last 10 trading years due to abysmally low profits which meant that there was no value claiming further allowances when I already had no tax liability.  So, I will have no van but cannot claim the residual value, as a loss, in one go?  My current pool is around £3200 all in, so ...

Thanks - and I did go read the linked document, which further depressed me.

You can only take a balancing allowance on a general pool when the trade ceases, but if you sell an asset for the pool balance or more, the pool will reduce to nil.

I see.  So even if I could afford to replace the vehicle, I would have to add that to the pool, (unless I opted for the mileage allowance scheme), and carry both through the WDA 18% annual claim, even though one of them no longer exists?  Seems crazy.  Makes me wonder what would happen if the remainder of the pool was also a total loss during an RTA, (as it's always in the van on work days).  Could ostensibly have 4/5 items being "carried forward" that were destroyed in one fell swoop.  I don't suppose for one second that any of the years where I didn't claim can be "rolled over" ...
I am grateful for your input.  Thank you.

Jeremy535897

Maharishi said:

Jeremy535897 said:

Maharishi said:

Jeremy535897 said:

The first question is whether you use the cash basis. I assume not, as otherwise you would have no pool brought forward.
On that basis, as the van won't be in a special pool, the mere fact that it is the sole asset left is irrelevant: you deduct the £40 or whatever the scrap value is from the pool brought forward, and claim WDA if you need it on the balance.
See: https://www.gov.uk/government/publications/capital-allowances-and-balancing-charges-hs252-self-assessment-helpsheet/hs252-capital-allowances-and-balancing-charges-2021
"You take balancing allowances off your taxable profits. You only get a balancing allowance in the main or special rate pool when you stop your business. You can get a balancing allowance in a single asset pool when you sell or dispose of the asset that is in it."
However, assuming the balance in the pool is £1,000 or less, you can claim the balance whenever you like.
"You can write off all the balance in your main pool or the special rate pool when your pool’s value is £1,000 or less before you work out the WDA. This is called a small pools allowance. You claim this instead of claiming a WDA."

Are you saying that Ferro gave me the wrong advice?  This is confusing and, no, I don't use cash basis.  I have always had a pool for the vehicle and other equipment purchases.  I have only claimed my entitled WDA on 4 or 5 of the last 10 trading years due to abysmally low profits which meant that there was no value claiming further allowances when I already had no tax liability.  So, I will have no van but cannot claim the residual value, as a loss, in one go?  My current pool is around £3200 all in, so ...

Thanks - and I did go read the linked document, which further depressed me.

You can only take a balancing allowance on a general pool when the trade ceases, but if you sell an asset for the pool balance or more, the pool will reduce to nil.

I see.  So even if I could afford to replace the vehicle, I would have to add that to the pool, (unless I opted for the mileage allowance scheme), and carry both through the WDA 18% annual claim, even though one of them no longer exists?  Seems crazy.  Makes me wonder what would happen if the remainder of the pool was also a total loss during an RTA, (as it's always in the van on work days).  Could ostensibly have 4/5 items being "carried forward" that were destroyed in one fell swoop.  I don't suppose for one second that any of the years where I didn't claim can be "rolled over" ...
I am grateful for your input.  Thank you.

Unfortunately that is correct. You can't "roll over" disclaimed WDA. If you had an RTA that destroyed everything, you would have an insurance claim, and the proceeds would be deducted from the pool. You would also be able to claim whatever you wanted, up to the full cost, of any replacement vehicle and equipment. Alternatively, if you just decided to cease trading, your final year would include a claim for the balance of the pool. Dipping in and out of the cash basis, and careful timing of a replacement, might make a difference, as if you enter the cash basis you can claim the balance of the pool, but you would have to claim all of any replacement in the same tax year as an expense.

Maharishi

Jeremy535897 said:

Maharishi said:

Jeremy535897 said:

Maharishi said:

Jeremy535897 said:

The first question is whether you use the cash basis. I assume not, as otherwise you would have no pool brought forward.
On that basis, as the van won't be in a special pool, the mere fact that it is the sole asset left is irrelevant: you deduct the £40 or whatever the scrap value is from the pool brought forward, and claim WDA if you need it on the balance.
See: https://www.gov.uk/government/publications/capital-allowances-and-balancing-charges-hs252-self-assessment-helpsheet/hs252-capital-allowances-and-balancing-charges-2021
"You take balancing allowances off your taxable profits. You only get a balancing allowance in the main or special rate pool when you stop your business. You can get a balancing allowance in a single asset pool when you sell or dispose of the asset that is in it."
However, assuming the balance in the pool is £1,000 or less, you can claim the balance whenever you like.
"You can write off all the balance in your main pool or the special rate pool when your pool’s value is £1,000 or less before you work out the WDA. This is called a small pools allowance. You claim this instead of claiming a WDA."

Are you saying that Ferro gave me the wrong advice?  This is confusing and, no, I don't use cash basis.  I have always had a pool for the vehicle and other equipment purchases.  I have only claimed my entitled WDA on 4 or 5 of the last 10 trading years due to abysmally low profits which meant that there was no value claiming further allowances when I already had no tax liability.  So, I will have no van but cannot claim the residual value, as a loss, in one go?  My current pool is around £3200 all in, so ...

Thanks - and I did go read the linked document, which further depressed me.

You can only take a balancing allowance on a general pool when the trade ceases, but if you sell an asset for the pool balance or more, the pool will reduce to nil.

I see.  So even if I could afford to replace the vehicle, I would have to add that to the pool, (unless I opted for the mileage allowance scheme), and carry both through the WDA 18% annual claim, even though one of them no longer exists?  Seems crazy.  Makes me wonder what would happen if the remainder of the pool was also a total loss during an RTA, (as it's always in the van on work days).  Could ostensibly have 4/5 items being "carried forward" that were destroyed in one fell swoop.  I don't suppose for one second that any of the years where I didn't claim can be "rolled over" ...
I am grateful for your input.  Thank you.

Unfortunately that is correct. You can't "roll over" disclaimed WDA. If you had an RTA that destroyed everything, you would have an insurance claim, and the proceeds would be deducted from the pool. You would also be able to claim whatever you wanted, up to the full cost, of any replacement vehicle and equipment. Alternatively, if you just decided to cease trading, your final year would include a claim for the balance of the pool. Dipping in and out of the cash basis, and careful timing of a replacement, might make a difference, as if you enter the cash basis you can claim the balance of the pool, but you would have to claim all of any replacement in the same tax year as an expense.

The insurance claim is probably moot as insuring musical equipment tends to be pretty expensive and as it's a poorly paid vocation at grass-roots level, I have never done so.  Of course, if the fault lay with another party then I guess that it does indeed become part of a claim.  The cash basis I have never looked at.  My accounts were done by a local chap for years and when he retired pre-plague, I just basically followed what he had been doing for me, using his layout as a template.  We never had a conversation, during our annual meet-ups, which featured the phrase "cash basis"; I just did what I was told to do, figuring that he knew best and was surely steering me in the right direction.

I will follow your advice to the letter.  If you have any links that explain the difference between the accounting practices, that might help to educate me further.  If not, I am sure that between Mr Google and Mr HMRC, I can happen upon the relevant documentation.

Many thanks.

Jeremy535897

Quite a useful guide here:
https://www.litrg.org.uk/working/self-employment/calculating-self-employed-profits/accounts-cash-basis