.png)
.png)
17 September 2000
Within the tentacles?
Within the tentacles?
My client is an unincorporated sole trader engineering business with a current year-end of 30 June. Because of an overhang of previous personal debt problems, this has been on a very tight rein from the bank and with very cramped facilities. The last six months made it apparent that his equipment needed a drastic upgrade and we presented a business plan for a new workshop with a new automated lathe. The bank and the machine supplier both decided to support the plan financially and the new facilities should be operational by November. It was intended that he would incorporate within the next couple of months but the bank has strongly advised against this, since potential new customers would find no track record from a company search. The lathe was purchased on 1 August (on finance and for delivery later) at a cost of £75,000, following the course originally decided by my client before any thoughts of possible tax advantages came into the picture.
We wish to change the year-end to coincide with the commencement of production with the new facilities. However, this will effectively make the substantial first year allowances available one tax year earlier than leaving the status quo. In conjunction with other capital allowances, loss relief may even be generated, an admittedly useful tax advantage at a critical time.
In these circumstances is the Revenue likely to challenge the commercial reasons for our decision? How should the notice of change of date be presented so that the tax advantages do not overshadow our need to track from day one what will effectively be a new business? Are there any other difficulties or opportunities in this scenario?
(Query T15,688) Anxious.
My client is an unincorporated sole trader engineering business with a current year-end of 30 June. Because of an overhang of previous personal debt problems, this has been on a very tight rein from the bank and with very cramped facilities. The last six months made it apparent that his equipment needed a drastic upgrade and we presented a business plan for a new workshop with a new automated lathe. The bank and the machine supplier both decided to support the plan financially and the new facilities should be operational by November. It was intended that he would incorporate within the next couple of months but the bank has strongly advised against this, since potential new customers would find no track record from a company search. The lathe was purchased on 1 August (on finance and for delivery later) at a cost of £75,000, following the course originally decided by my client before any thoughts of possible tax advantages came into the picture.
We wish to change the year-end to coincide with the commencement of production with the new facilities. However, this will effectively make the substantial first year allowances available one tax year earlier than leaving the status quo. In conjunction with other capital allowances, loss relief may even be generated, an admittedly useful tax advantage at a critical time.
In these circumstances is the Revenue likely to challenge the commercial reasons for our decision? How should the notice of change of date be presented so that the tax advantages do not overshadow our need to track from day one what will effectively be a new business? Are there any other difficulties or opportunities in this scenario?
(Query T15,688) Anxious.
