Replies to This Discussion

PRO MemberPermalink Reply by Anthony @ JDC Maintenance on January 7, 2012 at 22:17

Im sure it will cause a lot of grief, the fact you mentioned you buy machinery, van etc every year, thought you would like to be aware of the drastic change!

www.mibservices.co.uk said:

You may well be right, the figure i qouted goes back a few years. Thats a hell of a drop from £100k to £25k :-((. Thats going p@&& a lot of small businesses and sole traders right off.



Anthony Toop said:

I believe AIA is currently £100,000 but as from April 2012 this will drop to a much lower £25,000

www.mibservices.co.uk said:

AIA is £50K. You can claim 100% relief on all transport tools plant in the tax year you buy it. Or you can depreciate it over 1 - 5 years if you prefer. All accountanrs have their prefered way if doing things. My account was depreciating all my plant vans tools etc over a 4 year period, until I discovered that. She got bollocked and told to use the £50k limit on every plant investment i made. Lets be honest, very few of us are going to exceed the limit and if like me you purchase new machinery, plant and vans each year then IMO its best to take 100% relief every year.

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PRO MemberPermalink Reply by Brian www.mibservices.co.uk on January 7, 2012 at 22:23

Yeah thanks for the heads up, note to self, speak to my accountant on a more regular basis lol.

Anthony Toop said:

Im sure it will cause a lot of grief, the fact you mentioned you buy machinery, van etc every year, thought you would like to be aware of the drastic change!

www.mibservices.co.uk said:

You may well be right, the figure i qouted goes back a few years. Thats a hell of a drop from £100k to £25k :-((. Thats going p@&& a lot of small businesses and sole traders right off.



Anthony Toop said:

I believe AIA is currently £100,000 but as from April 2012 this will drop to a much lower £25,000

www.mibservices.co.uk said:

AIA is £50K. You can claim 100% relief on all transport tools plant in the tax year you buy it. Or you can depreciate it over 1 - 5 years if you prefer. All accountanrs have their prefered way if doing things. My account was depreciating all my plant vans tools etc over a 4 year period, until I discovered that. She got bollocked and told to use the £50k limit on every plant investment i made. Lets be honest, very few of us are going to exceed the limit and if like me you purchase new machinery, plant and vans each year then IMO its best to take 100% relief every year.

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PRO MemberPermalink Reply by Steve Sonic Grounds Maintenance on January 8, 2012 at 8:24

Anthony dont you think its time to get an accountant to do all this for you?
Have you got the new van yet?
I wont know who to look out for now on the road!!

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PRO MemberPermalink Reply by Gardens4u.co.uk on January 8, 2012 at 11:56

did you earn the money for buying the old van?  if so did you already pay tax on it?

was it a 'loan' ?   either way  it should be written-off as depreciation somewhere on your accounts over the last 3 years in my experience/ pt 1 accounting i passed ?!

otherwise as Brian said spend it on some nice new machinaary and its written off straight away against and of next accounting yrs profit april 2011-2012 or whenever your 'financial start of the yr was'....

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Permalink Reply by Tim Wettone on January 8, 2012 at 15:44

There seems to be a lot of confusion regarding the difference between depreciation and AIAs.  They are not the same at all.  Depreciation is an accounting (NOT a tax) mechanism designed to write off an asset over its expected useful life, sometimes on a straight line basis (for example over 4 years) and sometimes on a reducing balance basis. Depreciation has nothing to do with tax and is NOT a tax deductible cost or charge.

AIAs, or capital allowances, are a mechanism to give you tax relief on assets purchased. They are NOT an accounting transaction.

So, accounting software will usually (and correctly) include a device to depreciate an asset on an agreed basis.  This is to arrive at a profit (or loss) on generally accepted accounting rules, to get a fair view of the business and to be able to compare its results with another similar business.  In order to arrive at the taxable profit, something which is entirely different, one removes the depreciation charge and replaces it with AIA's or capital allowances.  There may be other adjustments as well, such as private use adjustments and the disallowance of entertaining expenses.

To deal with another uncertainty on a previous post, AIAs are available for both limited companies and sole traders.

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PRO MemberPermalink Reply by Anthony @ JDC Maintenance on January 8, 2012 at 22:06

Agreed, think i will have to get some better software for the next tax year, my existing accounting software, which is basically spread sheets, doesnt seem able to cope with concept of an AIA

Anything i enter as a FA(fixed Asset) is automatically depreciated by the software, but its the only way of seperating the purchased items out as part of the AIA from the normal tax deductable stuff. The only way i can see of getting round it is to have 100% depreciation on said FA and then it obviously has nothing to depreciate overtime, there doesnt seem to be a seperate system for listing AIA purchases, i guess thats not the case with more expensive software?

Tim Wettone said:

There seems to be a lot of confusion regarding the difference between depreciation and AIAs.  They are not the same at all.  Depreciation is an accounting (NOT a tax) mechanism designed to write off an asset over its expected useful life, sometimes on a straight line basis (for example over 4 years) and sometimes on a reducing balance basis. Depreciation has nothing to do with tax and is NOT a tax deductible cost or charge.

AIAs, or capital allowances, are a mechanism to give you tax relief on assets purchased. They are NOT an accounting transaction.

So, accounting software will usually (and correctly) include a device to depreciate an asset on an agreed basis.  This is to arrive at a profit (or loss) on generally accepted accounting rules, to get a fair view of the business and to be able to compare its results with another similar business.  In order to arrive at the taxable profit, something which is entirely different, one removes the depreciation charge and replaces it with AIA's or capital allowances.  There may be other adjustments as well, such as private use adjustments and the disallowance of entertaining expenses.

To deal with another uncertainty on a previous post, AIAs are available for both limited companies and sole traders.

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PRO MemberPermalink Reply by Anthony @ JDC Maintenance on January 8, 2012 at 22:12

Steve, to be honest i dont mind doing the accounts myself, indeed for the time being i would rather gain some insight into all the basics before handing stuff over to an accountant proper. When the time comes to employ however i will reconsider for sure.

I will post some pics of the new van, i collect it tomorrow (Monday)

Steve Sonic Grounds Maintenance said:

Anthony dont you think its time to get an accountant to do all this for you?
Have you got the new van yet?
I wont know who to look out for now on the road!!

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PRO MemberPermalink Reply by David Cox on January 8, 2012 at 22:55

Your right, my mistake AIA does apply to Sole traders as well.

I will e-mail my accountant RE-Van vs Car, as if it can be applied to the van that I sold for scrap last year.... I would be over the moon. Thanks for kicking the mind into gear!

Anthony Toop said:

AIA is indeed different for cars but not vans

Not sure how AIA works for LTD co but it is definately not solely for them, think your accountant may be a tad confused!!

Have a read here HMRC

David Cox said:

Dont want to throw a spanner in the works - But my Accountant was addamant to the extreme that you Can - NOT use the AIA on a vehicle and there are separate rules in place for vehicles. Also AIA only applies to LTD companies and not to solo traders (which I you are I think? Sorry If Im wrong)

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Permalink Reply by Tim Wettone on January 8, 2012 at 23:21

I think you are missing the point about accounting software.  It does what it says on the tin.  It is designed for accounting, not tax calculations.  They are completely seperate.  You won't find an accounting system, no matter how expensive, to incorporate tax issues like AIAs.

Anthony Toop said:

Agreed, think i will have to get some better software for the next tax year, my existing accounting software, which is basically spread sheets, doesnt seem able to cope with concept of an AIA

Anything i enter as a FA(fixed Asset) is automatically depreciated by the software, but its the only way of seperating the purchased items out as part of the AIA from the normal tax deductable stuff. The only way i can see of getting round it is to have 100% depreciation on said FA and then it obviously has nothing to depreciate overtime, there doesnt seem to be a seperate system for listing AIA purchases, i guess thats not the case with more expensive software?

Tim Wettone said:

There seems to be a lot of confusion regarding the difference between depreciation and AIAs.  They are not the same at all.  Depreciation is an accounting (NOT a tax) mechanism designed to write off an asset over its expected useful life, sometimes on a straight line basis (for example over 4 years) and sometimes on a reducing balance basis. Depreciation has nothing to do with tax and is NOT a tax deductible cost or charge.

AIAs, or capital allowances, are a mechanism to give you tax relief on assets purchased. They are NOT an accounting transaction.

So, accounting software will usually (and correctly) include a device to depreciate an asset on an agreed basis.  This is to arrive at a profit (or loss) on generally accepted accounting rules, to get a fair view of the business and to be able to compare its results with another similar business.  In order to arrive at the taxable profit, something which is entirely different, one removes the depreciation charge and replaces it with AIA's or capital allowances.  There may be other adjustments as well, such as private use adjustments and the disallowance of entertaining expenses.

To deal with another uncertainty on a previous post, AIAs are available for both limited companies and sole traders.

• ▶ Reply

PRO MemberPermalink Reply by Anthony @ JDC Maintenance on January 8, 2012 at 23:52

I understand what your saying, but the software is supposed to produce all the necessary details of my income/outgoings etc to help produce my tax return, if there is no apparent facility to tell it i want said large purchase(van) as part of an AIA and not under normal business costs as HMRC require, where do i include it? i can make a note of it on paper for when i file the tax return online and enter it seperately then, but as far as the software is then concerned it hasnt actually gone through the books! As i said the only way i can get it to work correctly is to enter it as a fixed asset and then immediately increase its depreciation to 100%, seems a bit half arsed, shouldnt there be a facility to enter an item under AIA with no reference to depreciation confusing the issue?

Anyway, sorted now, thanks for everyones input ;-)

Tim Wettone said:

I think you are missing the point about accounting software.  It does what it says on the tin.  It is designed for accounting, not tax calculations.  They are completely seperate.  You won't find an accounting system, no matter how expensive, to incorporate tax issues like AIAs.

Anthony Toop said:

Agreed, think i will have to get some better software for the next tax year, my existing accounting software, which is basically spread sheets, doesnt seem able to cope with concept of an AIA

Anything i enter as a FA(fixed Asset) is automatically depreciated by the software, but its the only way of seperating the purchased items out as part of the AIA from the normal tax deductable stuff. The only way i can see of getting round it is to have 100% depreciation on said FA and then it obviously has nothing to depreciate overtime, there doesnt seem to be a seperate system for listing AIA purchases, i guess thats not the case with more expensive software?

Tim Wettone said:

There seems to be a lot of confusion regarding the difference between depreciation and AIAs.  They are not the same at all.  Depreciation is an accounting (NOT a tax) mechanism designed to write off an asset over its expected useful life, sometimes on a straight line basis (for example over 4 years) and sometimes on a reducing balance basis. Depreciation has nothing to do with tax and is NOT a tax deductible cost or charge.

AIAs, or capital allowances, are a mechanism to give you tax relief on assets purchased. They are NOT an accounting transaction.

So, accounting software will usually (and correctly) include a device to depreciate an asset on an agreed basis.  This is to arrive at a profit (or loss) on generally accepted accounting rules, to get a fair view of the business and to be able to compare its results with another similar business.  In order to arrive at the taxable profit, something which is entirely different, one removes the depreciation charge and replaces it with AIA's or capital allowances.  There may be other adjustments as well, such as private use adjustments and the disallowance of entertaining expenses.

To deal with another uncertainty on a previous post, AIAs are available for both limited companies and sole traders.

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Permalink Reply by Tim Wettone on January 9, 2012 at 19:21

Out of interest, what software are you using and what does it cost you every year?

Anthony Toop said:

I understand what your saying, but the software is supposed to produce all the necessary details of my income/outgoings etc to help produce my tax return, if there is no apparent facility to tell it i want said large purchase(van) as part of an AIA and not under normal business costs as HMRC require, where do i include it? i can make a note of it on paper for when i file the tax return online and enter it seperately then, but as far as the software is then concerned it hasnt actually gone through the books! As i said the only way i can get it to work correctly is to enter it as a fixed asset and then immediately increase its depreciation to 100%, seems a bit half arsed, shouldnt there be a facility to enter an item under AIA with no reference to depreciation confusing the issue?

Anyway, sorted now, thanks for everyones input ;-)

Tim Wettone said:

I think you are missing the point about accounting software.  It does what it says on the tin.  It is designed for accounting, not tax calculations.  They are completely seperate.  You won't find an accounting system, no matter how expensive, to incorporate tax issues like AIAs.

Anthony Toop said:

Agreed, think i will have to get some better software for the next tax year, my existing accounting software, which is basically spread sheets, doesnt seem able to cope with concept of an AIA

Anything i enter as a FA(fixed Asset) is automatically depreciated by the software, but its the only way of seperating the purchased items out as part of the AIA from the normal tax deductable stuff. The only way i can see of getting round it is to have 100% depreciation on said FA and then it obviously has nothing to depreciate overtime, there doesnt seem to be a seperate system for listing AIA purchases, i guess thats not the case with more expensive software?

Tim Wettone said:

There seems to be a lot of confusion regarding the difference between depreciation and AIAs.  They are not the same at all.  Depreciation is an accounting (NOT a tax) mechanism designed to write off an asset over its expected useful life, sometimes on a straight line basis (for example over 4 years) and sometimes on a reducing balance basis. Depreciation has nothing to do with tax and is NOT a tax deductible cost or charge.

AIAs, or capital allowances, are a mechanism to give you tax relief on assets purchased. They are NOT an accounting transaction.

So, accounting software will usually (and correctly) include a device to depreciate an asset on an agreed basis.  This is to arrive at a profit (or loss) on generally accepted accounting rules, to get a fair view of the business and to be able to compare its results with another similar business.  In order to arrive at the taxable profit, something which is entirely different, one removes the depreciation charge and replaces it with AIA's or capital allowances.  There may be other adjustments as well, such as private use adjustments and the disallowance of entertaining expenses.

To deal with another uncertainty on a previous post, AIAs are available for both limited companies and sole traders.

• ▶ Reply

PRO MemberPermalink Reply by Anthony @ JDC Maintenance on January 9, 2012 at 23:55

I use DIY Accounting as i only require the basics, Im not Vat registered and i dont currently employ

It is very cheap to buy, being spreadsheet based and not a stand alone product, so i guess you cant expect all the bells and whistles, Is there software you would recommend that will cover all the basics that isnt ridiculously expensive?

http://www.diyaccounting.co.uk/  I use the Sole Trader version

Tim Wettone said:

Out of interest, what software are you using and what does it cost you every year?

Anthony Toop said:

I understand what your saying, but the software is supposed to produce all the necessary details of my income/outgoings etc to help produce my tax return, if there is no apparent facility to tell it i want said large purchase(van) as part of an AIA and not under normal business costs as HMRC require, where do i include it? i can make a note of it on paper for when i file the tax return online and enter it seperately then, but as far as the software is then concerned it hasnt actually gone through the books! As i said the only way i can get it to work correctly is to enter it as a fixed asset and then immediately increase its depreciation to 100%, seems a bit half arsed, shouldnt there be a facility to enter an item under AIA with no reference to depreciation confusing the issue?

Anyway, sorted now, thanks for everyones input ;-)

Tim Wettone said:

I think you are missing the point about accounting software.  It does what it says on the tin.  It is designed for accounting, not tax calculations.  They are completely seperate.  You won't find an accounting system, no matter how expensive, to incorporate tax issues like AIAs.

Anthony Toop said:

Agreed, think i will have to get some better software for the next tax year, my existing accounting software, which is basically spread sheets, doesnt seem able to cope with concept of an AIA

Anything i enter as a FA(fixed Asset) is automatically depreciated by the software, but its the only way of seperating the purchased items out as part of the AIA from the normal tax deductable stuff. The only way i can see of getting round it is to have 100% depreciation on said FA and then it obviously has nothing to depreciate overtime, there doesnt seem to be a seperate system for listing AIA purchases, i guess thats not the case with more expensive software?

Tim Wettone said:

There seems to be a lot of confusion regarding the difference between depreciation and AIAs.  They are not the same at all.  Depreciation is an accounting (NOT a tax) mechanism designed to write off an asset over its expected useful life, sometimes on a straight line basis (for example over 4 years) and sometimes on a reducing balance basis. Depreciation has nothing to do with tax and is NOT a tax deductible cost or charge.

AIAs, or capital allowances, are a mechanism to give you tax relief on assets purchased. They are NOT an accounting transaction.

So, accounting software will usually (and correctly) include a device to depreciate an asset on an agreed basis.  This is to arrive at a profit (or loss) on generally accepted accounting rules, to get a fair view of the business and to be able to compare its results with another similar business.  In order to arrive at the taxable profit, something which is entirely different, one removes the depreciation charge and replaces it with AIA's or capital allowances.  There may be other adjustments as well, such as private use adjustments and the disallowance of entertaining expenses.

To deal with another uncertainty on a previous post, AIAs are available for both limited companies and sole traders.

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