Selling Company Computer - How to calculate tax?

Discussion in 'Accounts & Finance' started by Dave0108, Sep 27, 2017.

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  1. Dave0108

    Dave0108 UKBF Contributor Free Member

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    I cannot get a clear understanding of how sale of company equipment is treated for tax purposes.

    Example

    If a limited company bought a computer 4 years ago for £1000. The cost of the computer would then be devalued by £250 per year and this would be accounted for via Capital Gains to reduce Corporate Tax Liability by £1000 over 4 years.

    So If this computer is to now be sold for £200?

    How would tax liability be calculated? Would it be simply treated as a sale of stock and 20% TAX would apply on the amount of £200?

    Or would it be done in some other way?

    Thanks
     
    Posted: Sep 27, 2017 By: Dave0108 Member since: Oct 16, 2015
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  2. Scalloway

    Scalloway UKBF Legend Free Member

    16,597 3,514
    £250 per year would not represent the normal tax write down. You could either claim 100% of the cost in the year of purchase or 18% of the reducing value each year.

    When you sell an asset you take the written down value (WDV) for tax and deduct the sale proceeds. If you get more for the computer than its tax WDV a balancing charge is added to your taxable profit. If you get less than its tax WDV a balancing allowance is reduces your taxable profit.

    You do not pay Capital Gains Tax on assets bought for use in the business.
     
    Posted: Sep 27, 2017 By: Scalloway Member since: Jun 6, 2010
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  3. MyAccountantOnline

    MyAccountantOnline UKBF Legend Full Member

    13,305 2,500
    What capital allowances have you claimed on the computer?

    If you've claimed 100% allowances the entire £1,000 will have be written off so the £200 will be a balancing charge which is subject to tax at 19%.
     
    Posted: Sep 27, 2017 By: MyAccountantOnline Member since: Sep 24, 2008
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