A vehicle was purchased with the intention to refurbish it and to resell it. It was recorded in the P&L as a purchase in the Cost of sale category. In the following year it was decided that it will not be sold but rather be kept as a part of the business and used in the business as a non-current asset. Can this item be moved to the balance sheet, recognised as non current asset and depreciated it even if it was recorded in the P&L in the previous year?
Yes you can move the item from a current asset (stock) to a fixed asset bearing in mind the rules on capital allowances and deprecation relating to vehicles.
I assume that whilst you had the vehicle in cost of sales you did record it in closing stock on the balance sheet; so it would not have had a profit and loss impact last year. If you didn’t do that your profit would have been understated and would be wrong. If this was the case then you will need to re-file last year’s accounts recognising the vehicle in closing stock.
If you are not able to follow this explanation then it may be time to seek the services of an accountant to help you out.
Advice given is for illustration purposes only and should not be relied upon for your tax planning or tax affairs. We recommend that you seek the advice of a suitably qualified accountant before making any tax planning decisions.