Selling surplus equipment

January 2009

If you have equipment that is no longer contributing to your business, now may be a good time to consider a sale. Certainly this would seem to be a good and effective way to bolster your business cash flow.

However, beware unwelcome tax consequences.

Assets bought before April 2008 - If:

1. The asset was purchased some time ago, and

2. The present written down value of all your business assets is negligible for tax purposes.

When you sell the item of equipment, plant, computer etc, the disposal may generate a balancing charge. In other words part of the cash you receive may have to be reserved to pay extra tax!

Assets bought after 1 April 2008

Since the 1 April 2008 companies, and from 6 April 2008 unincorporated businesses, can write off up to £50,000 a year for qualifying equipment purchases.

If you now decide to sell an asset bought after those dates, and a full write off was claimed, then all of the proceeds of sale may become taxable.

Planning as always is key. If you are thinking of such a disposal please call so that we can advise on the tax effects.

Also please note that in most cases the above comments would not apply to cars which have an element of private use.