Accounting for disposal and purchase of vehicles

Carnmore

I had a work vehicle for 8 years and disposed of it in December 2018, the final year of the capital allowance claim. The annual claim is €867 which will be claimed for 2018. The vehicle was sold for €3000. It appears the vehicle was sold for a 'profit'.

How is this accounted for in an income tax computation and capital allowances computation?

A replacement vehicle was purchased in December 2018.
Can capital allowances be claimed against two vehicles in the same year?

Calahonda52

Yes re second question

The taxable profits on disposal is sale proceeds minus written down tax value, which I assume is close to zero.

the correct terminology, as noted below is balancing charge.

A balancing charge is a means of making sure you don't claim too much tax relief on the cost of an asset you buy for your business. It'll increase the amount of profit you have to pay tax on. A balancing charge is the opposite of a capital allowance, which reduces the amount of profit you have to pay tax on.

TitianGerm

Carnmore wrote: »

I had a work vehicle for 8 years and disposed of it in December 2018, the final year of the capital allowance claim. The annual claim is €867 which will be claimed for 2018. The vehicle was sold for €3000. It appears the vehicle was sold for a 'profit'.

How is this accounted for in an income tax computation and capital allowances computation?

A replacement vehicle was purchased in December 2018.
Can capital allowances be claimed against two vehicles in the same year?

You won't pay tax on the "profit" but will need to include a balancing charge in your income tax return.

The balancing charge is Sales Proceeds less Tax Written Down Value. So in your case on the old van you will have a Balance Charge of €3000.

Marcusm

TitianGerm wrote: »

You won't pay tax on the "profit" but will need to include a balancing charge in your income tax return.

The balancing charge is Sales Proceeds less Tax Written Down Value. So in your case on the old van you will have a Balance Charge of €3000.

You do realise that this ends up with the same result!

TitianGerm

Marcusm wrote: »

You do realise that this ends up with the same result!

Yes I do but profit/loss on disposal of a fixed asset is not a taxable item.

Bocking 14

TitianGerm wrote: »

You won't pay tax on the "profit" but will need to include a balancing charge in your income tax return.

The balancing charge is Sales Proceeds less Tax Written Down Value. So in your case on the old van you will have a Balance Charge of €3000.

In the tax computation should the balancing charge be listed underneath but separately to “income”?

TitianGerm

Bocking 14 wrote: »

In the tax computation should the balancing charge be listed underneath but separately to “income”?

On Form 11 there will be a section where you enter your Capital Allowances. Just under where you enter your claim for the year you'll see another box to enter Balancing Charge/Allowance. Fill in the €3000 there.