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Plant cost £20000,
it was destroyed and insurance paid out £25000,
New plant was purchased for £25000.
The gain is £5000, but dont need to pay tax on the gain if it is used to reduce the base cost of the new Plant to (25,000 cost less 5000 gain) £20000.
When applying for Capital Allowance against this new plant can IUse AIA allowance against it as the old asset is deemed to have been disposed at no gain.
What cost do I show in my asset register to validate the claim I will make on AIA? Even if it ends up in the main pool instead, I need to show cost of asset, maybe this will all come out in the book keeping entries, but what is the principle of how this is dealt with.Help appreciated.
From where did you get this question as it is very unlikely that plant and machinery would have a value in excess of cost or that an insurance company would paying out such a value – that said capital allowances should be available on the full cost of 25,000
Thanks – There are a few examples like this throughout BPP 17/18 Page 424 Question 88 Peter, bought vase £12k, insurance paid out £20k and he bought new one for 17k. Area was Testing Rollover relief on destruction of assets. In this example the answer was
Proceeds received £20,000
Less Cost £12,000
Gain £8000 (5k rolled over, 3k subject to immediate CGT)gain immediately chargeable was £20000 -17000 = 3000 ins proceeds not used.
The base cost of the new vase for any further sale (rollover relief) was then deemed to be £17000 – 5000 = £12000.
The reason I asked about Plant in particular, was the amount that would be shown in the asset register as cost would be the amount that attracted AIA and where the cost figure would be historically kept so that any future gain on sale could refer to. If it were showing 17000 in asset register and not 12000 I foresaw issues.
If we put 17k cost in asset register, when will the 5k gain we have received ever be subject to CGT?
Going back to my original question, i see the double entry as: –
Original Purchase db assets 20k,
Dep/Capital allowance cr depreciation 20k (presuming fully depreciated)
Reverse the above to dispose of upon destruction.
New asset purchase db assets 25k (which we will claim AIA on)
Bank (insurance payout) cr 25kIn my example, when will the 5k gain ever be realised and subject to CGT if we dont reduce the base cost of the replacement in the asset register and for AIA calculation.
Help please as really confused. Do we keep separate records for CGT calcs outside of the usual asset register?
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