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Balancing charge / allowance

Forums › ACCA Forums › ACCA TX Taxation Forums › Balancing charge / allowance

  • This topic has 5 replies, 4 voices, and was last updated 14 years ago by richieinspain.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • May 23, 2011 at 10:59 pm #48577
    dolphinslover
    Member
    • Topics: 26
    • Replies: 15
    • ☆

    Someone brief me about it ? please?

    May 24, 2011 at 8:50 am #82222
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    Please look at the OT notes and video for chapter 5 to explain

    May 25, 2011 at 9:48 pm #82223
    richieinspain
    Member
    • Topics: 19
    • Replies: 86
    • ☆☆

    Heres an example…. lets say you have an expensive car which has a b/d balance of £10000. You then sell the car for £9000. You then get a balancing allowance of £1000. However, if you sold the car at a profit (lets say proceeds were £12000) then there is a balancing charge of £2000

    May 26, 2011 at 9:28 am #82224
    raj123nair
    Participant
    • Topics: 2
    • Replies: 76
    • ☆☆

    Let me try to explain to you.
    Lets assume you have started your business in 2010 and you have purchased a asset for your business which cost around £20,000. As per tax you would be getting a capital allowance on this Say @ 20%.

    For 2010 you would get a capital allowance of £4,000 (i.e. £20,000 * 20%)

    Now you in 2011 you have sold the product. lets see the effect on capital allowance.

    1) Sold the machine for £18,000

    In this case as a company u would get a benefit of £2000 i.e. £18,000(sales price) – £20,000(purchase price)-£4,000(capital allowance of last year).

    Since this is a addition benefit, it would be taxable referred as “Balancing Charge”

    2) Sold the machine for £10,000

    In this case you would have made a loss of £6,000 i.e. £10,000(Sales price)-£20,000(purchase price)-£4,000(capital allowance)

    Since this a loss. it would be allowed as deduction from your taxable profit as “Balancing allowance”.

    Hope this helps.

    May 29, 2011 at 6:55 pm #82226
    dolphinslover
    Member
    • Topics: 26
    • Replies: 15
    • ☆

    so in short, when u have a profit its a balancing charge and when u have a loss its a balancing allowance ?

    May 29, 2011 at 8:11 pm #82227
    richieinspain
    Member
    • Topics: 19
    • Replies: 86
    • ☆☆

    you got it!

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