Sole trader - using personal assets for business?

[seven_segment]

I've tried researching this but as someone looking to set up as a sole trader, I'm now more confused than ever. Over the past couple of years I've purchased various equipment that I've been using for charity and non-profit events, so no money has changed hands. I'd now like to use this equipment to form a business and do some paid events.

From a tax relief standpoint, it seems that the equipment should be brought into the business and recorded on my balance sheet at fair market value and then write down allowance claimed over its useful life. I haven't started trading yet but I don't believe the equipment could be considered a pre-trading loss as it wasn't purchased solely with business intent.

My problem lies with wrapping my head around the idea of a balance sheet when, as a sole trader, I an the company are one and the same. When moving personal assets into the company, is any money really changing hands (this wouldn't make sense as I would be paying myself!), or is it merely a notional entry in the accounts? Likewise, if I wanted to "buy back" an asset for personal use before it has fully depreciated, would this be a similar case and, if so, would I use the asset's value in the pool at that time, or the true current market value?

Finally, is there any rule that states equipment purchased before trade commenced but now used solely by the business *must* be brought into the company as an asset?

 

[Scalloway]

The other side of the accounting entry when an asset you already own is Capital Introduced. When you remove it from the business it goes to Capital Withdrawn.

You only need to put assets into the business accounts if you wish to claim capital allowances against business profits.

 

[seven_segment]

Thank for the clear and concise answer. Presumably the same applies to equipment purchased after the business starts trading? That is to say, it's fine to buy equipment/machinery that would meet the definition of a capital asset without going through the business accounts, but the equipment obviously can't be expensed or capital allowances claimed? Thanks again.

 

[SteveHa]

For new equipment purchased for the business after commencement you may be able to claim Annual Investment Allowance, subject to some restrictions (e.g. motor vehicles) and (very generous) annual limits.

Have a read of https://www.gov.uk/capital-allowances

 

[Scalloway]

That is to say, it's fine to buy equipment/machinery that would meet the definition of a capital asset without going through the business accounts, but the equipment obviously can't be expensed or capital allowances claimed?

You can if you wish.