Income Tax question

[waterboy]

I'm giving a mate a hand doing their tax return. It's a good few years since I've done any income tax stuff and have a question regarding Capital Allowances if anyone can help.

Basically they were sole trading and PAYE for the last 2 years or so. This year they stopped the sole trading after a few months and just doing PAYE stuff now. They will now have unused capital allowances left unused. Can they use them all up this year to offset against income or can they only use the 12.5% as normal and it's just tough luck, and you lose the balance of the allowances unless they get other sole trade work at some future date?

[tackle-bag]

I'm no expert, but as far as I know you can effectively only claim capital allowances, at the appropriate rate, for a year in which the trade is ongoing. This is subject to the usual caveat that to claim capital allowances, the capital asset must be in use at the end of the relevant basis period. Section 296 of the Taxes Consolidation Act 1997 deems you to claim capital allowances for years in which the trade is not carried on, but you will not have any income to set them against. The latter rule is primarily relevant for the purposes of calculating any balancing allowance/charge on the sale of the asset.

[Donny B.]

I'm giving a mate a hand doing their tax return.

I wish your mate well for his forth-coming court case so!

[waterboy]

I'm no expert, but as far as I know you can effectively only claim capital allowances, at the appropriate rate, for a year in which the trade is ongoing. This is subject to the usual caveat that to claim capital allowances, the capital asset must be in use at the end of the relevant basis period. Section 296 of the Taxes Consolidation Act 1997 deems you to claim capital allowances for years in which the trade is not carried on, but you will not have any income to set them against. The latter rule is primarily relevant for the purposes of calculating any balancing allowance/charge on the sale of the asset.

Thats what I thought all right, was worth a shot though!!

I'm giving a mate a hand doing their tax return.

I wish your mate well for his forth-coming court case so!

I assume a brown paper bag still cures all ills in this country

[Peg Leg]

I'm no expert, but as far as I know you can effectively only claim capital allowances, at the appropriate rate, for a year in which the trade is ongoing. This is subject to the usual caveat that to claim capital allowances, the capital asset must be in use at the end of the relevant basis period. Section 296 of the Taxes Consolidation Act 1997 deems you to claim capital allowances for years in which the trade is not carried on, but you will not have any income to set them against. The latter rule is primarily relevant for the purposes of calculating any balancing allowance/charge on the sale of the asset.

Thats what I thought all right, was worth a shot though!!

I'm giving a mate a hand doing their tax return.

I wish your mate well for his forth-coming court case so!

I assume a brown paper bag still cures all ills in this country

Sheesh, I'm in the wrong line of work, we're only using brown envelopes!!

[Dexter]

I'm no expert, but as far as I know you can effectively only claim capital allowances, at the appropriate rate, for a year in which the trade is ongoing. This is subject to the usual caveat that to claim capital allowances, the capital asset must be in use at the end of the relevant basis period. Section 296 of the Taxes Consolidation Act 1997 deems you to claim capital allowances for years in which the trade is not carried on, but you will not have any income to set them against. The latter rule is primarily relevant for the purposes of calculating any balancing allowance/charge on the sale of the asset.

Correct, the capital allowances are ring-fenced with the trade they apply to, and any income resulting from that trade. They can't be offset against unrelated income.

[waterboy]

I'm no expert, but as far as I know you can effectively only claim capital allowances, at the appropriate rate, for a year in which the trade is ongoing. This is subject to the usual caveat that to claim capital allowances, the capital asset must be in use at the end of the relevant basis period. Section 296 of the Taxes Consolidation Act 1997 deems you to claim capital allowances for years in which the trade is not carried on, but you will not have any income to set them against. The latter rule is primarily relevant for the purposes of calculating any balancing allowance/charge on the sale of the asset.

Correct, the capital allowances are ring-fenced with the trade they apply to, and any income resulting from that trade. They can't be offset against unrelated income.

This would have been offset against income from the trade they applied to and not any other sources of income.

[tackle-bag]

I'm no expert, but as far as I know you can effectively only claim capital allowances, at the appropriate rate, for a year in which the trade is ongoing. This is subject to the usual caveat that to claim capital allowances, the capital asset must be in use at the end of the relevant basis period. Section 296 of the Taxes Consolidation Act 1997 deems you to claim capital allowances for years in which the trade is not carried on, but you will not have any income to set them against. The latter rule is primarily relevant for the purposes of calculating any balancing allowance/charge on the sale of the asset.

Correct, the capital allowances are ring-fenced with the trade they apply to, and any income resulting from that trade. They can't be offset against unrelated income.

This would have been offset against income from the trade they applied to and not any other sources of income.

I think what Dexter means is that even though section 296 of the 1997 Act deems you to take them even though the trade is not being carried on, you're not allowed to use them as against your income from an unrelated trade i.e. in this case, your mate can't use the deemed capital allowances against his PAYE income from a separate trade.

[waterboy]

Correct, the capital allowances are ring-fenced with the trade they apply to, and any income resulting from that trade. They can't be offset against unrelated income.

This would have been offset against income from the trade they applied to and not any other sources of income.

I think what Dexter means is that even though section 296 of the 1997 Act deems you to take them even though the trade is not being carried on, you're not allowed to use them as against your income from an unrelated trade i.e. in this case, your mate can't use the deemed capital allowances against his PAYE income from a separate trade.

Ah right, sorry Dexter misunderstood you there. Yeah they won't be using the deemed allowance against any PAYE income. Thanks for the help lads.