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Post Info TOPIC: Amortisation of intangible asset in Ltd Company. Now sold and profit made. Question arising


Master Book-keeper

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Amortisation of intangible asset in Ltd Company. Now sold and profit made. Question arising


Time to wake up after your week long sleep folks!!!   Can't believe that the forum has been this dead.

Taxi Plate introduced to Ltd Co at 11.25k and amortised over 20 years.

Plate sold for 17k so 5.75k profit made, which I understand will be taxed at CT rate after allowing for inflation.  Amortisation of £1875, is this allocated back to CA as a gain? 



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John 

 

 

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Guru

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Hi John

It has been a bit quiet on here!

I have no experience in dealing with this and probably never will for that same reason but I always thought that on disposal of an intangible asset you took the cost and then deducted however many years of amortisation to date to give you the book value this is then deducted from the sale proceeds to give the profit and this will be liable to corporation tax as Income.

As I said this is only what I thought and I am probably wrong so please do not take this as advice and wait for someone else who has dealt with this before to give an opinion.



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Doug

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Master Book-keeper

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Morning you two.

Totally agree, weirdly quiet on here. Was wondering about contacting Steve. Not checked out how it is rating with other sites on the old search engine via another computer yet. Given even the spammers aren't bothering it must be seo related, surely.

Ive not done disposal of an intangible, but this one is, I would suggest via the same method as a fixed asset disposal. So as Doug says, clear out your asset costs, accumulated amortisation and sale monies to your disposal account and the balance is your profit.

You mentioned inflation John, were you talking indexation allowance? (corporate CGT)

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Joanne  

 

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Master Book-keeper

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Hi Joanne

I thought I had replied with the answer to your question, sorry yes its the indexation allowance.

I'm just completing the accounts today and I'm scratching my head as to the journal entries.  You very kindly gave me a guide in http://forum.bookkeepers.network/t63991018/disposal-of-an-asset-journal-entries/  but this is a profit situation and I'm lost, sorry

Situation is as follows   Recorded 1/9/15 in FA intangibles at 11250   amortisation to 28/2/17  £1875   Indexation 922

Plate sold Sept 17 for 17000

From your previous guide I CR 11250  cost additions -  DR disposal account 11250

DR amortisation BF 1875 - CR disposal account 1875

then I'm flummoxed!!!   Payment into bank 17000 where do I stick this?   £922 indexation where do I stick this?

Sorry to be a pain, it should click but it isn't.  cry

 

Am I right in saying I have a profit of £6703 to record against CT?

 



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.



Master Book-keeper

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Hi John
Only half skim read, popping in an all day meeting now. Just back from 2 days in sunny Watford (but for a funeral this time) so head not quite in gear, think I will be falling asleep in the meeting. Catch up later with this on.

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Joanne  

 

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Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



Master Book-keeper

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Leger wrote:

Hi Joanne

I thought I had replied with the answer to your question, sorry yes its the indexation allowance.

I'm just completing the accounts today and I'm scratching my head as to the journal entries.  You very kindly gave me a guide in http://forum.bookkeepers.network/t63991018/disposal-of-an-asset-journal-entries/  but this is a profit situation and I'm lost, sorry

Situation is as follows   Recorded 1/9/15 in FA intangibles at 11250   amortisation to 28/2/17  £1875   Indexation 922

Plate sold Sept 17 for 17000

From your previous guide I CR 11250  cost additions -  DR disposal account 11250

DR amortisation BF 1875 - CR disposal account 1875

then I'm flummoxed!!!   Payment into bank 17000 where do I stick this?   £922 indexation where do I stick this?

Sorry to be a pain, it should click but it isn't.  cry

 

Am I right in saying I have a profit of £6703 to record against CT?

 


 Hi John

not had chance to review my link!

esentially yes 

credit   Cost addition 11250 

     debit disposal

debit disposal £1875

     Credit accumulated amortisation (balance sheet, sorry wanted to stress it wasn't P&l)  £1875.

that clears both lines from the balance sheet.

for payment 

debit bank £17000

      Credit disposal £17000.

essentially your balancing item on your disposal account dr £3875.

draw up your t accounts, as then it's easier to see.

This is the amount transferred to your P&l account, ie the profit On disposal.  Only gets more complicated than that when part exchanges are in the mix.

never actually thought about indexation allowance for a taxi plate. But essentially that is just a tax calculation and not one that will affect the accounts in any way (unless I think, when defrred tax is involved and just for the notes). Ie it's just like the ct disallowables...a tax adjustment.

hope I'm making sense. Sorry for any typoS and dreadful layout.

 



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Joanne  

 

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



Master Book-keeper

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Cheshire wrote:

never actually thought about indexation allowance for a taxi plate. But essentially that is just a tax calculation and not one that will affect the accounts in any way (unless I think, when defrred tax is involved and just for the notes). Ie it's just like the ct disallowables...a tax adjustment.

 


 Thank you so much.  I've got it now.  

The taxi plate itself has no value.  It's only because Harrogate BC don't issue new plates so they are much sought after.  IF HBC were to deregulate the price would collapse.  I treated it at the time as an intangible asset akin to freewill.



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.

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