Tax implications on machinery.

[Green oak]

Brought well sold for a profit. Does one have to pay capital gains on the said machine

 

[Enry]

Brought well sold for a profit. Does one have to pay capital gains on the said machine

depends on the value after depreciation of your total machinery pool. But as a sole item, yes, and obviously cover any tax relief claimed when it was bought. The super relief in place between 21 and 23 had a real sting in the tail if the item was then surplus to requirement and sold. Accountant had a client who had bought a high value tractor, claimed the 130% tax relief but then 2 years on, restructured and decided to sell it, he hadn't factored in the fact that it was worth close to what he paid and would then be subject to tax at 130% of the sale price

 

[Wigeon]

Big capital allowances are not a way of avoiding tax, obviously.

Always thought it a bit odd as people buy kit when they have made money, rather than pay tax when they actually have cash, it just becomes a tax time bomb.

 

[Green oak]

It’s a plough 6 furrow brought in 2015 for £19k. Only done 500 acres. Then I released ploughing isn’t for me. And it’s been sitting in the shad since.

 

[How much]

Sell it to yourself at the written down value or less and make a loss on it then you sell it personally to the new owner at the agreed selling price and keep the profit personally tax free .

 

[neilo]

Brought well sold for a profit. Does one have to pay capital gains on the said machine

I asked my accountant the exact same question a couple of weeks ago, as I’m going to be selling off a bit of kit that has been depreciated on the books.
He replied that the extra you make on the sale, over that depreciated value, is liable to income tax, not CGT. As such, this year’s harvest will likely cancel it out for a lot of people.

 

[Daddy Pig]

depends on the value after depreciation of your total machinery pool. But as a sole item, yes, and obviously cover any tax relief claimed when it was bought. The super relief in place between 21 and 23 had a real sting in the tail if the item was then surplus to requirement and sold. Accountant had a client who had bought a high value tractor, claimed the 130% tax relief but then 2 years on, restructured and decided to sell it, he hadn't factored in the fact that it was worth close to what he paid and would then be subject to tax at 130% of the sale price

Are you sure about that ?

 

[Farma Parma]

It’s a plough 6 furrow brought in 2015 for £19k. Only done 500 acres. Then I released ploughing isn’t for me. And it’s been sitting in the shad since.

If you sell it for more than its written down value in your accounts after the 5 years then iam afraid you will pay income tax on any profit
There is no way around this. Same plough today will be over £30k now depending on spec.
If your business doesnt have much profit for the year you sell itm then crack on sell it & enjoy the profit uplift.

 

[Moors Lad]

With respect if the OP can buy a plough of that value he might be best having an accountant to ask, however it`ll be income tax rather than CG if it`s sold for a profit over it`s book value (I think!).....

 

[Enry]

Are you sure about that ?

Are you sure about that ?

Yes while the super deduction was in place, used example here of £100k tractor = £130k tax relief, sold a year later for £90k = £117k added on to taxable profit, if sold after 1/4/23 it would be £90k https://www.tax.service.gov.uk/guid...sset/outcome/super-deduction-balancing-charge

 

[Exfarmer]

It would only be CGT if it was not Applicable to your business and was purchased as a speculation Or investment

 

[Daddy Pig]

Yes while the super deduction was in place, used example here of £100k tractor = £130k tax relief, sold a year later for £90k = £117k added on to taxable profit, if sold after 1/4/23 it would be £90k https://www.tax.service.gov.uk/guid...sset/outcome/super-deduction-balancing-charge

So the £117 k is taxable its not the amount of tax due, which is how I read your first post. I couldn't understand why anyone would sell something if the tax would be more than they sold the item for.

 

[Enry]

So the £117 k is taxable its not the amount of tax due, which is how I read your first post. I couldn't understand why anyone would sell something if the tax would be more than they sold the item for.

correct, subject to tax at the prevailing tax rate - so if a 100k tractor was bought in 2022, it would have saved £24,700 corporation tax - 19% of £130k.

If it was sold (assuming no pool to balance) now, for 80k in a company with profits of over £50k it would be liable for corporation tax at 25% as I understand so £20k tax due on the sale leaving £60k - net tax saving would be £4700.