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Leger


Master Book-keeper

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Vehicle Disposal Journal
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I never could get my head round doing the journal for a vehicle disposal

Bought for £11495 (+VAT)  insurance loss (stolen) received £20870  

1st question is should I account for the VAT on amount received, my thoughts say no as insurance don't pay the VAT.

Ignoring that for a minute I know that £11495 is a credit against cost additions and the £9375 as profit on "sale" of FA but I don't know where the £20870 goes.  Tried FA disposal but, as I thought it would,  increases the FA by that amount.

EDIT:  Vehicle is £18915 + VAT, I was looking at the replacement vehicle.  Doh!!



-- Edited by Leger on Thursday 25th of August 2022 09:58:32 PM

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John 

 

 

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Onion4Sage


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Hi John,

The payment of an insurance claim by an insurer is not a supply for VAT. The payment is compensation made under an indemnity contract and is therefore not consideration for any supply. I'm assuming the amount capitalised for the car was the ex VAT amount of £18,915

Dr Profit/Loss on disposal of fixed assets £18,915

Cr Vehicle Cost £18,915

Dr Accumulated depreciation - Vehicles £x

Cr Profit/Loss on disposal of fixed assets £x

Cr Profit/Loss on disposal of fixed assets £20,870

Dr Bank £20,870

Kind regards,



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Ian

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Leger


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Ah thanks Ian, that's brilliant and much appreciated..  Yes the amount was the ex vat price. 



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John 

 

 

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Artois


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Hi John

Agree with Ian's entries, but for tax purposes the disposal is limited to how much the van cost when doing the tax computations,



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Doug

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


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Hi Doug

Yes I'm aware of that but good point highlighting it.  In this case there is no depreciation anyway as bought and stolen in same tax year.



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John 

 

 

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Artois


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Leger wrote:

Hi Doug

Yes I'm aware of that but good point highlighting it.  In this case there is no depreciation anyway as bought and stolen in same tax year.

 Hi John

What I meant was depending where you put the purchase of the van when claiming CA the disposal would be limited to the original cost despite receiving more than this amount, so for example van bought for £10k and posted as a short life asset would be limited on disposal to the original cost of £10k even if sold for £12k, have a look at CA2001 s.62



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Doug

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


Master Book-keeper

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Thanks Doug

Looks like I need to gen up on capital allowances then, because that's something I wasn't aware of.  Currently I have £1955 profit which is showing as a credit on the PL, profit/loss on disposal.  Does this mean I disallow it for tax purposes?



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Artois


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Hi John

It all depends on which pool the asset is in, if it is in a pool of it's own then the disposal proceeds will be limited to the original cost, anything above this will be treated as a capital gain and not form part of the trading accounts, with a Ltd Co this may not make much difference as I am sure you are aware they pay C/Tax on their capital gains, however for a sole trader then they get an annual exemption which may well cover the gain in full. 



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Doug

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


Master Book-keeper

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Hi Doug

It's not even in a pool, as the commercial vehicle was purchased in August 21 and stolen either January or Feb 22.  Insurance paid out in March, so within the same financial year.  Had it been in a pool it have been part AIA and the rest motor vehicles 18%, so not a special asset pool, but it would be the only thing in that pool.  It's well within the annual exemption for CGT, so I'll delve further into that today.  Thanks for the pointers.



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
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