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Annual Investment Allowance

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    Annual Investment Allowance

    I am totally confused maybe because of the word 'allowance; in Annual Investment Allowance.

    Essentially Im confused over how to show the purchase on computer equipment and office furniture in accounts and for Cort Tax return and calculation. Obviously it is a Limited Company and very small.

    I will use an example to show my rookie-ness and confusion.

    Lets say the company turnover (sales) were 10,000 in the company accounts year.

    It bought Pc's and office furniture to the value of say 4,000 from the sole Director (used equip prev purchased and used by the Director for personal use).

    The Director doesnt want paid right now as it would be a hit on the business.

    So do we show this as

    10.000
    4000 (Directors Loan)
    6,000 Taxable profir
    Corp Tax at 20% due = 1,500

    Whats confusing but interesting is the whole Annual Investment Allowance scenaio. Does AIA mean?

    10,000 Sales
    4000 Directors Loan for the purchase of computers etc)
    6,000 Profit
    4000 Annual Investment Allowance - for the purchases of compouters
    2,000 Profit after deducting AIA
    500 Corporation Tax

    This seems to be 'to good to be true'....

    Or is it simply that had it not been a Director selling equip to the Limited Company that non-capital purchases would be shown as such and any Capital Element (computers etc) would be shown or deducted in Corp Tax as Annual Investment Allowances.


    It seems all very confusing to me

    #2
    Dealing with assets and capital allowances is one of those areas I find having an accountant is essential. What does your accountant say?

    Comment


      #3
      Why are you deducting the DLA from your profit? It’s not a cost or expense.

      Comment


        #4
        Sorry it should have been personal expenses which the Director is leaving in the company therefore Loan to the company FROM director?

        Comment


          #5
          Do you not use an accountant or Freeagent?
          'CUK forum personality of 2011 - Winner - Yes really!!!!

          Comment


            #6
            Freeagent

            Originally posted by northernladuk View Post
            Do you not use an accountant or Freeagent?
            Yes, just started with Free Agent, accountant have one for SA but looking now at Ltd ......

            Comment


              #7
              Originally posted by donna View Post
              Yes, just started with Free Agent, accountant have one for SA but looking now at Ltd ......
              Well freeagent will do the calculations for you but you still need an accountant to help with your knowledge gaps.

              Comment


                #8
                Originally posted by donna View Post
                Sorry it should have been personal expenses which the Director is leaving in the company therefore Loan to the company FROM director?
                unpaid personal expenses are different from a director's loan.

                a) they are unpaid personal expenses
                b) you've not loaned the company anything, it just hasn't paid you

                You can turn unpaid personal expenses into a loan if you account for it correctly.
                See You Next Tuesday

                Comment


                  #9
                  You definitely need an accountant, apart from you not understanding the tax rules, you can’t even make simple calculations.

                  20% of £6,000 is not £1,500 and why is the tax on your profit of £2,000 calculated at £500??
                  "The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance." Cicero

                  Comment


                    #10
                    Not to mention corporation tax is 19%, not 20%.

                    Comment

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