Balancing Charges on Asset Disposals

Balancing charges arise when you dispose of an asset that previously received capital allowances, such as a zero-emission car claimed under the 100% First Year Allowance (FYA). TinyTax does not currently have a dedicated field for box 727 (Balancing Charges) in the CT600 capital allowances section, but you can enter a balancing charge using the Other tax adjustments field.

What Is a Balancing Charge?

When you sell or dispose of an asset for more than its tax written-down value (TWDV), HMRC requires you to add back the excess as a balancing charge. This increases your taxable profit.

The most common scenario is a zero-emission car originally claimed under the 100% First Year Allowance:

• You claimed 100% FYA in year one, reducing the asset's TWDV to £0
• When you later sell the car, the entire sale proceeds become a balancing charge
• This amount must be added to your taxable profit for the year of disposal

How to Enter a Balancing Charge in TinyTax

TinyTax does not have a dedicated box 727 input. Instead, enter the balancing charge amount as a positive number in the Other tax adjustments field in the Tax Computation section:

This adds the amount back to your taxable profit, which is the correct tax effect of a balancing charge.

What This Means for Your CT600

The balancing charge entered via Other tax adjustments will flow through to box 165 (Net Trading Profits) and box 315 (Profits Chargeable to Corporation Tax). It will not appear as a discrete figure in box 727 on the CT600 form.

For most small companies, this produces the correct tax liability. However, if you need box 727 to appear explicitly on the CT600 (for example, because your accountant or HMRC requires it to be separately identified), you should consult an accountant who can prepare the return manually.

Common Questions

Can I use the Annual Investment Allowance field for a balancing charge?

No — the AIA field is for deductions (reducing taxable profit). A balancing charge is an addition to taxable profit, so you must use Other tax adjustments with a positive amount, not the AIA field.

What if my balancing charge comes from a pool of assets?

If you have a main rate or special rate pool with a negative balance at the end of the year (disposal proceeds exceed the pool balance), that negative balance is your balancing charge. Enter the absolute value as a positive number in Other tax adjustments.