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Cash Basis and capital allowances

03/05/2019 11:58:50
I purchased a van a few years ago 22k and currently have been using the WDA 18% each year I currently have a balance of 5k left to claim. I switched to a cash basis of accounting a couple of years ago, however I have continued to used the WDA of 18% each year. I listended to the capital allowances webinar this morning and they said if you use cash accounting basis you do not have any capital allowances, instead you put all expenditure in first year against expenses. Should I write off the whole 5k this year in expenses rather than keep putting it under capital allowances as 18% for a few more years?
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Re:Cash Basis and capital allowances

03/05/2019 13:25:46
Hi,

When entering or leaving cash basis there are transitional adjustments which need to be made in the first year.

In your case, as a van is not treated as a capital allowance under cash basis, you should have deducted the balance remaining as an expense in the first year of using cash basis.

As you have not done this, my suggestion is that you include the balance remaining as an expense when you submit your 2018/19 Self Assessment return. If you have already submitted your 2018/19 return then you can amend it.

We have more information in our Business Income Manual here:

BIM70067

Thanks for your question.

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Cash Basis and capital allowances

07/05/2019 13:03:54
If I decide to purchase another van and sell mine, would I just claim the cost of van less sale proceeds in year one on the cash basis? Also if I put a deposit down of £10k and pay the rest monthly via a loan agreement would I just claim the 10k in year 1 along with any monthly payments in year one, then future years claim the monthly payments in the year in which paid for cash accounting? Thank you
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Re:Cash Basis and capital allowances

07/05/2019 13:35:57
Hi,

Thanks for your question.

The two vans would need to be looked at separately. If you have already recovered the full cost of the old van as expenses, you would add in the price you get for sale as income alongside your turnover figure.

In regards to the new van you would claim as an expense the amount paid out in each year. In the first year if you pay the £10,000 and then some monthly instalments you can claim the amount paid. In subsequent years you would again claim the monthly amount paid. As a reminder any interest paid with the loan will be restricted to claiming maximum £500 per year.

This is the maximum in interest which can be claimed as an expense in any one year when using the cash basis.

I hope this helps.
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Cash Basis and capital allowances

09/05/2019 12:39:50
Ok thanks, so if the interest is say £700 per year do you just lose the £200?
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Re:Cash Basis and capital allowances

10/05/2019 08:31:02
Hi
Yes that is correct. A point to remember is that this will apply to all interest which may be claimable in the year, not a £500 limit on each item which has interest.

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