UK TAX
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UK TAX
Anybody know the UK tax allowance that can be deducted against profits of a limited company for money spent on maintaining a helicopter.
I.E. can 100% of the costs incurred overhauling a machine be deducted against company profit for the said financial year ?
I.E. can 100% of the costs incurred overhauling a machine be deducted against company profit for the said financial year ?
Does anybody know if accountance advisory costs on questions about helicopter maintenance costs tax allowances, can be deducted against profits of a limited company?
Cheers SLB
Cheers SLB
I'll take it from here.......
Does anybody know if advice gained from PPRUNE is recoverable against Accountancy costs offset against the clarification for recouping maintenance costs of overhauling a company helicopter within a Limited company.....
Does anybody know if advice gained from PPRUNE is recoverable against Accountancy costs offset against the clarification for recouping maintenance costs of overhauling a company helicopter within a Limited company.....
In all seriousness
You come over quite naive for someone discussing the huge expenses of operating a helicopter or three.....
There are so many pitfalls ahead that you must either seek 'proper' advice or get googling severely ....
Yes, there will be pruners on here who can advise but their personal situation will most probably be different than yours ...
For example - I would say - of course, you are only taxed on profit so maintenance costs will reduce your profit.
Allowable expenses/costs will also cover travel incurred during maintenance - as long as it is not commuting etc
There are no silly questions on Rotorheads but you might get some silly answers......
There are so many pitfalls ahead that you must either seek 'proper' advice or get googling severely ....
Yes, there will be pruners on here who can advise but their personal situation will most probably be different than yours ...
For example - I would say - of course, you are only taxed on profit so maintenance costs will reduce your profit.
Allowable expenses/costs will also cover travel incurred during maintenance - as long as it is not commuting etc
There are no silly questions on Rotorheads but you might get some silly answers......
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I think it’s a valid question and one I always wondered about, and asking different accountants and tax inspectors will give completely different answers ,so asking if anyone has had advice and used the allowances I think is a valid question.
The question should be is the Robinson rebuild 100% allowable in year 1 as normal maintenance under Uk tax law or is it a long term capital cost with draw down over a number of years
Give the guy a break he only wanted some advice on what other owners have done over the years
The question should be is the Robinson rebuild 100% allowable in year 1 as normal maintenance under Uk tax law or is it a long term capital cost with draw down over a number of years
Give the guy a break he only wanted some advice on what other owners have done over the years
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Pre-approval
As MD600 says, the problem with HMRC is that it depends who you get on the day and what mood they are in.
As long as the usage of the machine is demonstrably 100% for the use of the business, then all associated costs ought to be deductible from the company's bottom line, and therefore exempt from Corporation tax.
Our business is not aviation based. Prior to purchasing the helicopter, we wrote 2 applications to HMRC to effectively get a pre-emptive decision on how various elements of the running costs would be dealt with once we bought the machine.
These pre-clearances approached the issues of VAT, BIK, depreciation, maintenance and others.
Depending on your role in the business, BIK would be your major worry. If the business buys an asset which is available for your use, then there is theoretically a 28% liability over that asset's purchase value annually, regardless of whether you use it or not.
Even with our bargain R66, as the owner of the business and a rated pilot, without doing the due diligence I was looking at a possible tax liability of 28% of 720k at 45%. Each year.
Thankfully, HMRC reacted to our application in a pragmatic fashion, and a suitable compromise was reached.
The pre-approval requests were submitted by our Accountants. They are not specialist aviation accountants, but if you PM me, I'll gladly pass on their details.
Goes without saying - I'm not an accountant, and I'm only speaking about my experiences...
FF
As long as the usage of the machine is demonstrably 100% for the use of the business, then all associated costs ought to be deductible from the company's bottom line, and therefore exempt from Corporation tax.
Our business is not aviation based. Prior to purchasing the helicopter, we wrote 2 applications to HMRC to effectively get a pre-emptive decision on how various elements of the running costs would be dealt with once we bought the machine.
These pre-clearances approached the issues of VAT, BIK, depreciation, maintenance and others.
Depending on your role in the business, BIK would be your major worry. If the business buys an asset which is available for your use, then there is theoretically a 28% liability over that asset's purchase value annually, regardless of whether you use it or not.
Even with our bargain R66, as the owner of the business and a rated pilot, without doing the due diligence I was looking at a possible tax liability of 28% of 720k at 45%. Each year.
Thankfully, HMRC reacted to our application in a pragmatic fashion, and a suitable compromise was reached.
The pre-approval requests were submitted by our Accountants. They are not specialist aviation accountants, but if you PM me, I'll gladly pass on their details.
Goes without saying - I'm not an accountant, and I'm only speaking about my experiences...
FF
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Typically, a Robinson would be depreciated over 12 years, down from purchase price to estimated timed-out residual value. Depreciation is not tax deductible under normal circumstances.
The rebuild would incur a significant cost, which would be allowable on the P&L - however, the value residing in the balance sheet for the depreciated machine would increase, probably beyond the value of the rebuild. Detailed guidance from an Accountant required!
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Ignoring private use and other matters, UK tax law allows abusiness to claim a tax deduction for repair and maintenance costs in full when incurred, as it is reflected as an expense in the accounts. The accounting treatment will be as a revenue cost unless there is “enhancement expenditure”in which case that part of the cost is not revenue but capital and so it does not go through the P&L account and does not reduce profits.
An example might be buying cheaply a time-expired, not currently flying R44 and then getting an overhaul to obtain a legal, working machine. The case law in that area is complex; the previous owner merely deferring some maintenance that would have been “revenue expense” will not create a problem but significant improvement in the asset value compared to purchase, very soon after purchase, will. HMRC manuals deal with this area at BIM35450 and BIM35445 if you need to refer / can’t get to sleep.
Can you claim a tax deduction in advance for the overhaul costthat you know is coming; i.e. make a provision for the cost of the repairs eachhour that you currently fly?
No.
It used to be the case that the anticipated cost of overhauls could – if calculated with sufficient accuracy– form the basis of a provision against profits in the accounts under the then-existing rules (UK GAAP). That provision made in the accounts was allowed by the tax court in a mid-1990’s appeal Johnston (HMIT) v Britannia Airways Ltd. (the case reference is 67TC99). However, accounting rules have changed and applying the concepts introduced by FRS 12 (now contained in FRS 102), even though a business may be required to overhaul its aircraft at a future point in time, and might be able to calculate the cost of so doing with extreme accuracy, there is no present obligation on the business to do so and hence to incur that future cost. So the accounting rules do not any longer allow a business to create aprovision for future overhauls, repairs or maintenance and there is no argument therefore for up-front tax relief.
An example might be buying cheaply a time-expired, not currently flying R44 and then getting an overhaul to obtain a legal, working machine. The case law in that area is complex; the previous owner merely deferring some maintenance that would have been “revenue expense” will not create a problem but significant improvement in the asset value compared to purchase, very soon after purchase, will. HMRC manuals deal with this area at BIM35450 and BIM35445 if you need to refer / can’t get to sleep.
Can you claim a tax deduction in advance for the overhaul costthat you know is coming; i.e. make a provision for the cost of the repairs eachhour that you currently fly?
No.
It used to be the case that the anticipated cost of overhauls could – if calculated with sufficient accuracy– form the basis of a provision against profits in the accounts under the then-existing rules (UK GAAP). That provision made in the accounts was allowed by the tax court in a mid-1990’s appeal Johnston (HMIT) v Britannia Airways Ltd. (the case reference is 67TC99). However, accounting rules have changed and applying the concepts introduced by FRS 12 (now contained in FRS 102), even though a business may be required to overhaul its aircraft at a future point in time, and might be able to calculate the cost of so doing with extreme accuracy, there is no present obligation on the business to do so and hence to incur that future cost. So the accounting rules do not any longer allow a business to create aprovision for future overhauls, repairs or maintenance and there is no argument therefore for up-front tax relief.
Last edited by John R81; 26th Sep 2017 at 14:53.
UK Tax is a wonderful thing. Wife had cause to visit the local tax office when such things existed. The women bringing the file dropped it and out spilled a couple of newspaper cuttings with photographs taken at the time when the missus got her PPL H.
Fareastdriver is spot on !!!!!!
Fareastdriver is spot on !!!!!!
