Changing commercial vehicle, accounting/tax implications?

[mjb1]

My work commercial vehicle (double cab pickup truck) is 5 years old, and I'm wanting to replace it with a new(er) one. Small limited company, claimed 100% capital allowance for it 5 years ago, original purchase price was 20k, I'd estimate that it's now worth about 10 to 12k (+vat). New one is looking like about 22k+vat.

So far, I've been offered 8.5k trade in on it, which seems a bit on the low side (similar trucks are listed 12k upwards on Autotrader), so I might well be selling it separately, rather than part ex'ing it for the new one. How does the sale of the old truck fit into the company accounts though? Does it just get added as a trading income figure for the current tax year? Do I claim capital allowance on the difference between the purchase price of the new truck and the sale price of the old one, or do I claim 100% on the new one, then the old one handled separately?

To potentially complicate matters further, my financial year end is 31st May, so it might end up with buying the new vehicle in the current tax year, then selling the old one at the start of the next, which may or may not help in terms of tax and accounting. I could really do with buying the new one before 31st May, to claim capital allowance this year.

[VEX]

Be cautions with the selling prices on Auto Trader, I used them and ebay to pitch my price for a 2010 Isuzu Rodeo DMax and it didnt shift or even get a sniff at £8700 with no vat, with other listed at £8-9K plus VAT

Dropped it to £7500 and it moved within 24hours.

[Eric Mc]

As you claimed 100% Capital Allowances when you bought it, you will have to pay Corporation Tax on the sale/trade in value you get for it when you dispose of it. Of course, if you buy a relevant vehicle to replace it, you should be able tom claim 100£ Capital Allowances on the new one.

[s2kjock]

In the year you sell the pick up the difference between the sale price ( or px value) and the "net book value" (the cost less depreciation charged to date) will appear in your profit and loss account as a gain or loss.

[Eric Mc]

s2kjock said:

In the year you sell the pick up the difference between the sale price ( or px value) and the "net book value" (the cost less depreciation charged to date) will appear in your profit and loss account as a gain or loss.

That calculation is ignored for tax purposes. It is purely an accounting matter and not a tax matter.
The accounting treatment of fixed assets, the related depreciation and disposals often differs markedly from the tax treatment because in these areas accounting rules and tax rules are often quite different.

The calculation that matters for tax is the way the proceeds on disposal are shown in the Capital Allowance computation.

The OP mentioned that the business claimed the Annual Investment Allowance (AIA) when the vehicle was purchased. In other words, it claimed 100% Capital Allowances in the year the vehicle was bought.

That means the company offset the full cost of the vehicle against its taxable business profits as a Capital Allowance.

It also means that the tax written down value became "Nil" straight away.

Now that the vehicle is being sold or traded in, the proceeds that are obtained on the disposal will be offset against the tax Written Down Value.

As the tax Written Down Value is Nil, this means that ALL the proceeds will be added to the businesses taxable profits in the year of disposal.