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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi, I have a corporation tax query please. Here is the situation: A

Resolved Question:

Hi, I have a corporation tax query please. Here is the situation:
A limited company made a taxable profit in it's 1st 2 years of trading and paid over corporation tax to HMRC for the respective years accordingly. In it's 3rd year of trading it has made an accounting loss. On the first day of the 4th year the business sold all of it's fixed assets as a transfer of a going concern to a 3rd party and thus ceased trading. There are 2 parts to my question:
1) In the 3rd year as mentioned there is an accounting loss. There is a taxable profit pre claiming WDA capital allowances. Can the amount of capital allowances be restricted to a value which will create a taxable loss of a sufficient size such that the taxable losses can be carried back to years 1 and 2 of trading in order to get a tax refund? Or does the company have to claim the full 18% WDA?
2) If the company has to claim the full WDA in (1) above then even if it carried back losses it would have taxable losses to carry forward. Can the losses available to be carried forward be used to offset against the profit on disposal of the fixed assets on the 1st day in year 4?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Hi.

1 You can limit your claim for writing down allowances as well as other capital allowances in any given year to whatever level you like, between £0 and the maximum that you can claim for that year to maximise tax efficiency So, the answer to your question is yes. You can read about capital gains made by companies here.

2 Trading losses carried forward cannot be offset against capital gains of a later trading period. The profit on disposal of fixed assets is added back in your adjusted profit calculation as is depreciation. You then adjust your capital allowances calculation to reflect the disposal of assets on which you have claimed capital allowances. You cannot get more capital allowances than your net expenditure (sale proceeds less purchase price) on those assets.

I hope this helps but let me know if you have any further questions.







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Customer: replied 3 years ago.

Hi TonyTax

I have a follow on question in relation to the previous mentioned situation please:

The year end for the business is 31st March 2014. The transfer (i.e. the date of sale) of all the fixed assets occured on the 1st April 2014 which meant the business stopped trading at the end of the day on 31st March 2014. As the assets were sold on 1st April I assume any balancing charge/allowance in relation to capital allowances should be calculated in the tax computation in the year ending 31 March 2015 and not in the year end 31 March 2014? The sales invoice raised for the sales of the assets is dated 1st April 2014 and has been paid by the buyer in July 2014.

Many Thanks

Sandip

Expert:  TonyTax replied 3 years ago.

If I were you, I'd extend the accounting period by one day or a month so as to complete just one set of accounts. You can do that on Companies House Form 225 here. Look here for more information.

Either way, you will still need to complete two CT600 tax returns, one for the 12 months to the old accounting date and one for the extra day.



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