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Post Info TOPIC: AIA claimed in first year, what happens with disposals in second year?


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AIA claimed in first year, what happens with disposals in second year?


Hello, I have just joined the forums and would like help please. I am studying level 4 AAT and in a few weeks will be learning the business tax module, but I need help completing a client's tax return before the 31st Jan and don't have the full knowledge of Capital Allowances just yet.

Last year I had a new client who bought bouncy castles for £5000 so I claimed it all under AIA. During 19/20 year he has disposed of some of them, and bought new ones. Bearing in mind I did not utilise any capital allowances, what must I do on his tax return to show losses on each castle? All replies appreciated, thank you.



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Who is your licence with?

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Nessy50 wrote:

Hello, I have just joined the forums and would like help please. I am studying level 4 AAT and in a few weeks will be learning the business tax module, but I need help completing a client's tax return before the 31st Jan and don't have the full knowledge of Capital Allowances just yet.

Last year I had a new client who bought bouncy castles for £5000 so I claimed it all under AIA. During 19/20 year he has disposed of some of them, and bought new ones. Bearing in mind I did not utilise any capital allowances, what must I do on his tax return to show losses on each castle? All replies appreciated, thank you.


 Not sure what you mean with the last sentence, perhaps you could expand a bit, and also tell us a little bit more about what you do and your experience

If you claimed 100% AIA then you would be looking at disposals and balancing charges, does your PII cover you to be advising on these matters and submitting Tax returns?

Also I hope you did not use inflated prices for the bouncy castles biggrin



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Doug

These are only my opinions of how I see things and therefore should not be taken as advice



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Hello Doug

Thanks for your reply. I am a self-employed bookkeeper and have been involved in accounts and bookkeeping for 30 years. I have passed levels 2 and 3 AAT and halfway through level 4, I have had indemnity insurance for nearly 4 years, am supervised by HMRC for AML and also pay ICO fees.

The tax returns that I do do are simple ones, and anything I have concerns about I have a few accountants I can ask for advice. This one though for the bouncy castles I do need advice on. The guy bought lots of castles and now he has been round with his paperwork and he has been buying and selling different castles and event equipment ie Sumo costumes. I just need help on the capital allowances side of things and he has lost money on each sale of each castle.



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I am supervised by HMRC and will be a member of AAT after the next 2 exams have been passed.



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Hi Vanessa

I am still confused by your question, you say you need to complete the return by Jan 31st so I take it you mean your client is a sole trader and this return relates to the tax year 2018/2019 but then you go on to mention disposals during the 2019/2020 tax year so perhaps you have got the dates wrong? Maybe you could confirm

If you have claimed 100% AIA already then whatever your client sells the items for will become the disposal proceeds which will create a balancing charge 



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Doug

These are only my opinions of how I see things and therefore should not be taken as advice



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Sorry, you are right; it is for 18/19 year.

So, although I put the AIA through 17/18, I still need to draw up pools? The opening balance would be £5000, plus any new assets, less disposals = balancing charge. Or do I put new assets to AIA and just take the disposals off the pool?

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As Dout says there is something very clearly wrong with your dates, you shouldn't be doing the tax return by end of Jan 19 for 19/20 tax year.

Besides I think there are other issues here.

You state he is now trading in such so you need to overhaul your whole accounts and tax.

As you have absolutely no experience of capital allowances disposals you really should check with your PII that you are qualified to give such advice.

I think you should also be considering the AAT ethics on this, you don't want to end up in a disciplinary!

Perhaps you should also have a go at the entries and we can tell you if they are correct or not, best way to learn. To get you started look at the HMRC handout on cap allowances and pop your ideas on here.

Sorry for any typos, not got my glasses on and on a small phone keyboard.

edited to correct 2 spelling typos 



-- Edited by Cheshire on Monday 30th of December 2019 10:10:42 PM

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 Joanne  

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position (and my that I dont mean with HMRC)



Master Book-keeper

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You are a member of theAAT now, just not licenced by them. You are a student. Even if you become a full Member you will not be licenced by them without applying sep.

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 Joanne  

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position (and my that I dont mean with HMRC)



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Nessy50 wrote:

The tax returns that I do do are simple ones, and anything I have concerns about I have a few accountants I can ask for advice. This one though for the bouncy castles I do need advice on. The guy bought lots of castles and now he has been round with his paperwork and he has been buying and selling different castles and event equipment ie Sumo costumes. I just need help on the capital allowances side of things and he has lost money on each sale of each castle.


 Hi Vanessa

Just read this part again, as I think Joanne is getting at if he is buying and selling the bouncy castles and other equipment then will they qualify for AIA and capital allowances? I think not

Perhaps you could give a bit more information on what your client is actually doing, I thought that he had bought the castles for his own business in which case AIA would have been allowable, but now I am not so sure as they could well be classed as stock.

And just to clarify if you have claimed 100% AIA (even if incorrectly) then there is nothing in the pool!



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Doug

These are only my opinions of how I see things and therefore should not be taken as advice

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