Tax when you sell an asset

There are special rules that must be followed when you sell an asset on which capital allowances have been claimed. Capital allowances is the term used to describe the tax relief businesses can claim on certain capital expenditure and thereby reduce

There are special rules that must be followed when you sell an asset on which capital allowances have been claimed. Capital allowances is the term used to describe the tax relief businesses can claim on certain capital expenditure and thereby reduce the amount of taxable profits.

The sales value is usually the sales price. If you gave the asset away, stopped using the asset or sold it for less than it was worth then the market value should be used.

If you originally claimed 100% tax relief on the item, the business is required to add back the difference to their taxable profits. This is known as a balancing charge. A balancing charge is effectively a way of ensuring that a business does not claim more tax relief than they were entitled to on the purchase of a business asset. The balancing charge works in the opposite way to a capital allowance and increases the amount of profit on which tax is due.

If you originally used writing down allowances, you may have a balancing allowance or a balancing charge.

There are special rules for dealing with any balancing charges or balancing allowances where a business ceases to trade.

Source: HM Revenue & Customs Wed, 02 Jun 2021 00:00:00 +0100

Latest INSIGHTS

Check out our latest Insights for useful accounting tips and information.

What a tax code means

The letters in your tax code signify your entitlement (or not) to the annual tax free personal allowance. The tax codes are updated periodically and help employer’s work out how much tax to deduct from an employee’s pay packet.

The basic personal

Read More

Declare a beneficial interests in joint property

The usual tax position for couples who live together with their spouse or civil partners is that property income held in joint names is divided 50:50. This is regardless of the actual ownership structure. However, where there is unequal ownership and

Read More

Workplace pension responsibilities

Automatic enrolment for workplace pensions has helped many employees make provision for their retirement, with employers and government also contributing to make a larger pension pot.

The law states that employers must automatically enrol workers

Read More