Hi,

Allow me to post such simple question.
I’m closing my private limited company and preparing its final P/L & B/S.

I have just one tangible asset that is Personal Computer we bought in the previous fiscal year.

The conditions are:
Original Value: £410
Depreciation: annual depreciation 25% - £103 for the 1st year.
Net book value at the end of the previous fiscal year: £307

All what I want to do is just write-off this asset at the end of this fiscal year when we close the company.
Am I doing the right thing if I do as follows:
P/S - put £307 capital loss as a part of administrative expenses before operating profit
B/S - delete it from Fixed assets

Appreciate anyone’s advice - confirmation or correction

Thank you.

Vinci

Hi welcome to the forums.

Your accounting entries are dr depreciation 103, cr asset at cost 410.  This leaves 307 as you have stated but what is happening to the asset?  If you are taking it on then you would need to dr the directors loan with this 307.  If it is just being disposed of then you would debit loss on disposal with 307.

However that is not sufficient for tax purposes - are you happy with how you deal with it for tax purposes?

Hi Bluewednesday,

Many thanks for your prompt reply.
Yes, that’s exactly what I’m trying to do though, in which sense “not sufficient for tax purpose”?

Could you advise:
- exactly what challenges am I supposed to receive from HMRC?
- and what should I prepare for them?

Would appreciate your response.

Best regards,

Vinci

Bluewednesday - February 26 2010 08:11 AM

Hi welcome to the forums.

If it is just being disposed of then you would debit loss on disposal with 307.

However that is not sufficient for tax purposes - are you happy with how you deal with it for tax purposes?

the only challenges you could possibly receive from HMRC is the value that the pc has been disposed of, they would be expecting market value - although in practice I am sure the amount we are talking about is not material enough for them to bother but obviously it should be done correctly.

Allowances for the equipment weren’t (or shouldn’t have been) claimed via the accounts but via the capital allowances computation on the corporation tax return - is that what happened last year?

Bluewednesday - February 27 2010 03:35 AM

the only challenges you could possibly receive from HMRC is the value that the pc has been disposed of, they would be expecting market value - although in practice I am sure the amount we are talking about is not material enough for them to bother but obviously it should be done correctly.

Allowances for the equipment weren’t (or shouldn’t have been) claimed via the accounts but via the capital allowances computation on the corporation tax return - is that what happened last year?

Hi Bluewednesday,

Your points are well taken, yes the allowance was calculated as you stated.

After receiving your yesterday’s answer, I’m in fact trying to follow your first direction since I will keep using it for my private use after winding up the company.
In this case, is my following accounting in b/s correct:
-  put net asset value of £204 (£307 at the end of the previous year - £103 depreciation this year) as fixed asset
-  put £204 director’s loan account – actually where does this account belong to? as a part of liability or equity section? Besides, what I heard is that a loan to a director is illegal if it exceeds 10% of the relevant assets, and this is absolutely over 10% since it is my only asset, is what I heard correct?
Then, what is the implication to the tax both for corporation & me as a director?
Finally, can I end up with these in my last b/s of closing company? Or do I have to produce another statement when I repay this loan?

Sorry for bothering you so much though I would really appreciate your assistance.

Thank you.

Vinci

First of all i presume you are in the UK and following UK tax law.

Directors loan should be a liability, is there an existing directors loan account?  A loan to a director is not illegal but may incur penalty tax but we can deal with that if it comes to it.

Usually all our limited companies have an existing loan account where the company owes money to the debtor but that should already show in your accounts if that is the case.