Reply to: Going Permanent and Liquidating my LTD - Selling Assets?

[TheCyclingProgrammer]

Thank you for the detailed response and the links, very useful!! I am VAT registered but no purchases were over 2k so should keep it simple. Thanks again for your help.

Just to clarify, if you’re VAT registered you need to account for VAT on the sale of any asset.

If you were on the FRS, how you account for VAT depends on how you accounted for VAT on the original purchase. If it was part of a £2k or more purchase then like the original purchase, the VAT must be dealt with outside the FRS and accounted for in the normal way. If it was below £2k then it just forms part of your flat rate turnover and your flat rate is applied.

If you’re not on the flat rate scheme then account for VAT in the usual way.

[DKB]

Be careful here.

Firstly, there's no set rule as to whether certain assets should be treated as such or expensed. Generally anything that has a useful lifetime and retains value over several years should probably be deemed an asset but it's also common to treat assets below a certain value as expenses.

You also need to think about the tax and accounting treatment of assets separately. Just because you claim capital allowances in the first year for tax purposes, it still needs to be depreciated properly in your accounts.

The net book value of an asset does not necessarily equal its market value. You should be wary about selling company assets to yourself undervalue. The sale of company assets to a director can be a benefit in kind and should be declared on a P11D.

Also don't forget to account for VAT if applicable - if you were VAT registered on the standard VAT scheme when you bought the asset and reclaimed VAT (or if you were on the FRS and the purchase was part of a single purchase over £2k) then you will need to account for VAT on the sale to yourself.

Finally, if the market value is higher than the net book value when you sell it (including if the asset has been written off in your accounts) and you claimed 100% capital allowances you'll need to deal with a balancing charge and your company will need to pay corporation tax.

Ultimately you'll still end up with the asset and most of the money you paid YourCo for it after account for VAT, corporation tax and CGT on your final distribution.

Info on balancing charges:
Capital allowances when you sell an asset - GOV.UK

Thank you for the detailed response and the links, very useful!! I am VAT registered but no purchases were over 2k so should keep it simple. Thanks again for your help.

[DKB]

Thank you all for your responses, very useful. Most items I have, have been expensed as they are generally low value (Docking station £150 quid etc) and assumed they would be fairly worthless, but like the laptop, I do have a number of items that would be deemed to be of some value. The laptop was £1100 and bought in January 2019 and would absolutely like to retain it. I'm obviously happy to pay for it, but when I spoke to two friends, one said it would be depreciated and have a set value, the other said its a year old IT kit and is worthless and he'd write it off. I understand both points so thought I'd pop in here to get bit more of a rounded opinion!

Thanks again for your advice! I'll submit my last few invoices and leave it in the hands of the accounts to start sorting things. Thank you!

[WordIsBond]

You also need to think about the tax and accounting treatment of assets separately. Just because you claim capital allowances in the first year for tax purposes, it still needs to be depreciated properly in your accounts.

The net book value of an asset does not necessarily equal its market value. You should be wary about selling company assets to yourself undervalue. The sale of company assets to a director can be a benefit in kind and should be declared on a P11D.

This. The claiming of capital allowances is irrelevant to this question.

In general, don't sell to yourself under market value. In practice, you can probably get away with using depreciated value as a reasonable approximation of market value for small assets. HMRC probably doesn't want to argue over a few hundred quid in the valuation of a laptop.

[TheCyclingProgrammer]

Be careful here.

Firstly, there's no set rule as to whether certain assets should be treated as such or expensed. Generally anything that has a useful lifetime and retains value over several years should probably be deemed an asset but it's also common to treat assets below a certain value as expenses.

You also need to think about the tax and accounting treatment of assets separately. Just because you claim capital allowances in the first year for tax purposes, it still needs to be depreciated properly in your accounts.

The net book value of an asset does not necessarily equal its market value. You should be wary about selling company assets to yourself undervalue. The sale of company assets to a director can be a benefit in kind and should be declared on a P11D.

Also don't forget to account for VAT if applicable - if you were VAT registered on the standard VAT scheme when you bought the asset and reclaimed VAT (or if you were on the FRS and the purchase was part of a single purchase over £2k) then you will need to account for VAT on the sale to yourself.

Finally, if the market value is higher than the net book value when you sell it (including if the asset has been written off in your accounts) and you claimed 100% capital allowances you'll need to deal with a balancing charge and your company will need to pay corporation tax.

Ultimately you'll still end up with the asset and most of the money you paid YourCo for it after account for VAT, corporation tax and CGT on your final distribution.

Info on balancing charges:
Capital allowances when you sell an asset - GOV.UK

[MrButton]

Up to a limit of ₤1000 you can account for items simply as an expense rather than a fixed asset to be included in the balance sheet.

Your company can have its own policy for this.

Personally I choose > £500 AND useful lifetime if more than 1 year.

Even if it is a depreciated asset you don’t necessarily have to pay that amount left. You can just pay the going rate but have some proof of what the going rate is.

[northernladuk]

Depreciate over 3 years IIRC.

That's what I thought.

[Old Greg]

You say that but all three of my accountants moved anything over 500 in to asset. Couldn't comment on the depreciation time but I've a feeling for somethings it was for more than year as well but can't remember.

Depreciate over 3 years IIRC.

[BlasterBates]

You say that but all three of my accountants moved anything over 500 in to asset. Couldn't comment on the depreciation time but I've a feeling for somethings it was for more than year as well but can't remember.

Perhaps was too quick with my look up, I always define them as assets

[northernladuk]

Up to a limit of ₤1000 you can account for items simply as an expense rather than a fixed asset to be included in the balance sheet.

You say that but all three of my accountants moved anything over 500 in to asset. Couldn't comment on the depreciation time but I've a feeling for somethings it was for more than year as well but can't remember.

[BlasterBates]

I find it hard to believe HMRC will be happy with you claiming a high end laptop is worth nothing after a year.

Up to a limit of ₤1000 you can account for items simply as an expense rather than a fixed asset to be included in the balance sheet.

[Scruff]

Depends on the initial cost. Under £1k, no question about it.

[northernladuk]

The computer equipment would have been written off in the first year, in the tax computation.

I'd suggest that they be written down to zero in the books and then the sale value is zero

IANYA

I find it hard to believe HMRC will be happy with you claiming a high end laptop is worth nothing after a year.

[northernladuk]

The computer equipment would have been written off in the first year, in the tax computation.

I'd suggest that they be written down to zero in the books and then the sale value is zero

IANYA

Oops double post.

[Scruff]

The computer equipment would have been written off in the first year, in the tax computation.

I'd suggest that they be written down to zero in the books and then the sale value is zero

IANYA