0208 432 3310 / 0208 240 4498

If you would like to receive a regular summary of our news updates please sign up here!

Discontinuance of trade and the Annual Investment Allowance (AIA)

In a recently decided tax case a self-employed air conditioning engineer, David Keyl, was denied a claim for AIA. He had purchased a van in July 2008 and on 31 March 2009 (the end of his trading year) he transferred his sole trader business to a limited company.

Unfortunately, the legislation setting up the AIA includes a provision that relief will be denied in the year in which a trade discontinues.

In the case of David Keyl his sole trader business ceased to trade 31 March 2009 and therefore no claim could be made for AIA in the tax year 2008-09. The fact that Mr Keyl had continued to provide maintenance under existing contracts made no difference to this judgement.

The lesson to be learned here is that a decision to incorporate a business should not be taken lightly. If Mr Keyl and his advisors had reviewed the larger transactions he had entered into during 2008-09, they may well have delayed incorporation to the following year.

This entry was posted in Business. Bookmark the permalink.