Annual Investment Allowance and Balancing Charges?
Discussion
Trying to get my head around AIA and balancing charges a bit better. I bought a new van for my limited company in the current accounting year (cost 20k). As with previous commercial vehicles, I believe I can claim the AIA on the cost of it? However I also part exchanged my previous van in the transaction. The trade in value was 17.5k, it was 15 months old, and originally cost 24k. Again AIA was claimed on this van purchase, so I'm pretty sure there will be a balancing charge to compensate for that? I don't think the full 24k was claimed under AIA, as that was more than the business's net profit for that year.
Obviously I'm going to need to talk to my accountant about the previous AIA claimed, but I'm not so good at explaining this stuff over the phone, so I want to try and get it fairly straight in my head before calling him. From what I've seen online the balancing charge is calculated by adding the trade in value to the previous AIA, and then subtracting the original purchase cost? I think the highest that could be is about 10k. So 10k gets added on to my net profit, and AIA is claimed on the full purchase cost of the new vehicle this year?
The only other possibility I can think of is that I can only claim the AIA on the difference between the trade in value and the cost of the new van (2.5k)? I'm hoping that's not the case thought as the sales invoice for the new van has the full purchase price on it, and I invoiced the dealership for the trade in value.
Obviously I'm going to need to talk to my accountant about the previous AIA claimed, but I'm not so good at explaining this stuff over the phone, so I want to try and get it fairly straight in my head before calling him. From what I've seen online the balancing charge is calculated by adding the trade in value to the previous AIA, and then subtracting the original purchase cost? I think the highest that could be is about 10k. So 10k gets added on to my net profit, and AIA is claimed on the full purchase cost of the new vehicle this year?
The only other possibility I can think of is that I can only claim the AIA on the difference between the trade in value and the cost of the new van (2.5k)? I'm hoping that's not the case thought as the sales invoice for the new van has the full purchase price on it, and I invoiced the dealership for the trade in value.
If we assume that you did not claim the full AIA on van 1 then there will be some value in the pool. You will deduct the sales price of the new van from the brought forward pool giving you a balancing charge if the pool were lower.
Then you can claim up to 100% of the cost of the new van as AIA.
Example helps (even if numbers not yours)
Van 1 was £20k let's say you claimed £7.5k as part AIA so the £12.5 goes in the pool (and you can claim 18% writing down allowance in future years). Say you traded it in year 2 for £17.5 so you will (absent anything else in pool) have a balancing charge of £5k. New van bought for £20k and you can claim all or part of this as AIA in same year.
Then you can claim up to 100% of the cost of the new van as AIA.
Example helps (even if numbers not yours)
Van 1 was £20k let's say you claimed £7.5k as part AIA so the £12.5 goes in the pool (and you can claim 18% writing down allowance in future years). Say you traded it in year 2 for £17.5 so you will (absent anything else in pool) have a balancing charge of £5k. New van bought for £20k and you can claim all or part of this as AIA in same year.
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