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Sam, Accountant
Category: Tax
Satisfied Customers: 14157
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I bought a plant and machinery 2011 for £2000 which I now disposed

Customer Question

I bought a plant and machinery 2011 for £2000 which I now disposed off for £4500, how do I treat this in my tax computation. My main pool of assets is £7000
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Thanks for your question
This will create a balancing charge which is the difference between the value carried forward to this tax year - which you deduct for the disposal figure of £4500
(As one would assume you have claimed some of the £2000 since 2011)
Customer: replied 2 years ago.

Dear *****,

I was told this treatment was not right because the disposal amount is higher than the original cost. AIA has been claimed on the plant and machinery in 2011-12. My disposal value was limited to the original cost of the asset and the excess over the cost should be a chargeable gain. Please confirm

Expert:  Sam replied 2 years ago.
Hi David
No it IS right - if you had sold for less than the balancing value then you would have an additional capital allowance to claim but if you sell for more,(which you have done) then you have a balancing charge
The only difference is that you have NO value left as you claimed AIA - this means you have already claimed the full £2000 - and so you have a further £4500 to add back into the profits - which will be charged CT on.
You are claiming just the excess - as the value for capital allowance purposes (which includes the AIA regime) is NIL value (as you claimed the 100% value in the year or purchase) so the value carry forward to this tax year is NIL, which is deductible from the sale price
So £4500 less NIL = £4500
It is NOT a chargeable gain -
Expert:  Sam replied 2 years ago.
Hi David
Just a further advise note - assets of a business (such as property and shares) ARE subject to the regime of capital gains - but this is plant and machinery which falls within the capital allowance (which extends to the Annual Investment Allowance) regime of taxes
I do not know who advises you that capital gains applies, but I assure you (and I worked for HMRC for 26 years!) that the advise I offer is correct and
Let me know if you have any follow up questions -