Hi, I have a client who has bought a van for work (he's a builder and it's 100% business) and I think I can put the cost in as Annual Investment Allowance for the whole amount.
Just a couple of queries though.
Van cost £8,000 loan interest 3,000
Does the 8,000 qualify as the AIA and the 3,000 as an expense on the profit and loss? or will the whole 11,000 be the AIA?
For accounting purposes FRS15 (or IAS16/IAS23) gives you a choice of whether to capitalise or expense the interest.
However, for tax purposes you would be expected to expense the interest which would require you to make an annual tax calculation adjustment similar to the way that you currently do with depreciation.
So, that means that for tax purposes the interest would not form part of the cost of the asset for the annual investment allowance purposes but would rather be expensed through the P&L, but it could be capitalised and depreciated as part of the asset. (and for the tax return depreciation is added back and applicable interest for the period subtracted)
Further to the above you also need to clarify how the asset is being financed as if such is leasing that throws a whole different set of issues into the melting pot.
HTH,
Shaun.
p.s. Just for info FRS15 is being superseded by FRS102 which is more in line with the international standards (IAS16/23)
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
