Annual Investment Allowance

[Scruff]

There are 2 distinct calculations:

1. Your Financial Statements, which reflect your Trading results. This what your accountant will prepare and you, as the Director(s) will sign off. A copy is filed with Companies House.

2. Corporation tax computation - this shows how the Corporation tax is calculated, and reconciles the Trading results to the Corporations Taxable Income (this does not form part of the Financial Statements, and is generally prepared as a separate Schedule and included in the Corporation's Tax Return (CT 600)).

I would suggest that you engage a suitable Accountant to deal with this matter, who can complete both (1.) and (2.) above. If you get this wrong, which is where you are headed, then you are in for a World of Pain...

[craigy1874]

And you can't claim AIA if you purchase the assets from the Director as you state.

[TheCyclingProgrammer]

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

[Waldorf]

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??

[Lance]

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.

[Alan @ BroomeAffinity]

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.

[donna]

Freeagent

Do you not use an accountant or Freeagent?

Yes, just started with Free Agent, accountant have one for SA but looking now at Ltd ......

[northernladuk]

Do you not use an accountant or Freeagent?

[donna]

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

[Alan @ BroomeAffinity]

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

[TheCyclingProgrammer]

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

[donna]

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