Question asked by Daniel Cheater 10 years ago
I want to claim the full amount of a large tool that was bought in year one as a capital allowance, how do I do this on clear books, as I can only see the option of depreciation if I put it as an asset, or do I need to create a new account code for this and not put it as an asset?
Capital allowances affect your taxable profits which are different to your accounting profits, which are affected by depreciation. If you (or your accountant )claim 100% AIA the tool is now worth zero for tax purposes where as the depreciation for the year may be only say 25% so the value in your accounts will be 75% of the cost. The difference between the 2 methods will produce a deferred tax liability which will reduce year by year until the 2 are equal or the tool is sold. If the tool were to be sold the income from the sale would then be taxable. This is a brief summary and you should seek further clarification from your accountant.
Best answerHi Daniel
Capital Allowances aren't something you claim without the accounts, it's an entry within the tax return itself. So, create the fixed asset as normal within Clear Books, depreciate it as normal within Clear Books, make sure you don't claim the depreciation as an expense on the tax return but do complete the capital allowances section within the tax return.
Capital allowances affect your taxable profits which are different to your accounting profits, which are affected by depreciation. If you (or your accountant )claim 100% AIA the tool is now worth zero for tax purposes where as the depreciation for the year may be only say 25% so the value in your accounts will be 75% of the cost. The difference between the 2 methods will produce a deferred tax liability which will reduce year by year until the 2 are equal or the tool is sold. If the tool were to be sold the income from the sale would then be taxable. This is a brief summary and you should seek further clarification from your accountant.
Best answerYou beat me to it Kevin :).
I did, sorry. Your response was much better though :-)
And just to clarify, my first line should read "Capital Allowances aren't something you claim THROUGH the accounts".
You must 