Capital Allowance: Other

Question 1

Disposal Values

Several years ago, George bought a freezer for £4,000 for use in his newsagent’s shop. He claimed PMAs on its cost. He now buys a new one. For PMAs, what would be the disposal value of the old freezer if its MV were £2,000 and George were to

1. sell it to a rich eccentric antiques collector for £5,000?
2. sell it at open MV?
3. take it home for his own use?
4. sell it to his brother, for domestic use, for £100?
5. sell it to his brother, for use in his brother’s business, for £100? His brother claims PMAs on the freezer.

Answer 1

1. sell it to a rich eccentric antiques collector for £5,000. The answer is £4,000, being restricted to original cost.
2. sell it at open MV. The answer is £2,000, being the actual sale proceeds, which represent the open MV.
3. take it home for his use. The answer is £2,000, the open MV.
4. sell it to his brother, for domestic use, for £100. The answer is £2,000, being the open MV.
5. sell it to his brother, for use in his brother’s business, for £100. His brother claims PMAs on the freezer. The answer is £100 being the sale proceeds because his brother claims PMAs (on £100) in his trade.

Question 2

Balancing adjustment:
1) When does it arise for single:
2) Main?
3) Special

Answer 2

1) Can arise at any time
2) When the business ceases
3) When the business ceases

WDAs are not given for the chargeable period in which the business ceases. Instead, a balancing adjustment arises and is the subject of the next subchapter.

Question 3

What are Disposal Events?

Answer 3

• Ceases to own/loses posession - eg Sale or stolen
• plant or machinery ceasing to exist, because, for example, the customer has scrapped, destroyed or dismantled it
• Start to use wholly or partly for non-business use
• Cease trade

Question 4

Balancing Charge: When does it arise for:
1) Single
2) Class
3) Main
4) How are these treated by the business?

Answer 4

1) Whenever TDR exceeds AQE. The amount of BC is equal to the difference between the two figures.
2) Whenever TDR exceeds AQE. The amount of BC is equal to the difference between the two figures.
3) Whenever TDR exceeds AQE. The amount of BC is equal to the difference between the two figures.

All the same ^^

4)The BC is treated as a receipt of the business, and the company must include it in the computation of its trading profit.

Question 5

Business ceases trade: What happens? What is cliamable?
1) WDA?
2) FYA?
3) AIA?

Answer 5

1) Not claimable. A BA or BC will arise
2) Not claimable. A BA or BC will arise
3) Not claimable. A BA or BC will arise

If AQE exceeds TDR then BA
If TDR exceeds AQE then BC

Question 6

Don Wood Ltd ceases in business as a timber merchant on 31 October 2017. On that date, it sells all its plant and machinery for £15,000, which is less than original cost.
The WDV of the main pool brought forward after PMAs for the AP 12 months ended 31 December 2016 is £18,000.
The company bought some plant for £10,000 on 14 July 2017.
What is the PMAs computation for the final AP ended 31 October 2017?

Answer 6

Description Main Pool
£
WDV b/f 18,000
Additions 10,000
AQE 28,000
Less TDR (15,000)
BA 13,000

the addition is available but any allowances that might have been claimable on it would not be

Question 7

Insurance and WDV’s?

Answer 7

Insurance proceeds are taken to be the disposal value.

Question 8

Fixtures and fittings: Who gets to claim for them?

Answer 8

Legislation now allows tenants who incur capital expenditure on items of plant or machinery, that are legally landlord’s fixtures, to receive PMAs on that expenditure.

The general principle is that, if expenditure is incurred on fixtures that are plant or machinery used in a business, someone should receive PMAs. In most cases, that will be the person incurring the expenditure.

Question 9

WDA Hybrid Rates: What are they?

Answer 9

When WDA straddles periods of % change. You do an average and apply against the whole amount

Last change was in 2019.

Question 10

Time limts:
1) ITSA
2) CT

Answer 10

1) 1 year following 31 January. A return filed >1 year cannot claim
2) 2 years: 12 months from end of statutor filing period. Statory filing is 12 months from enf of, or 30 days after an enquiry

Question 11

WDA - shorter or longer periods?

Answer 11

WDA amount is apportioned to consider not tax advantage.

if period is 6 months and looks to claim WDA of 12,000 then a claim for 6k at 18% can be made.

Question 12

Gifts introduced later into the business

Answer 12

Use the MV, unless this is greater that what it was bought for.

example1:

Shilpa starts a beauty therapy business and introduces a treatment couch which she had bought for £1,800 whilst on a beauty course at college. When she starts in business, the market value of the couch is £1,400. She will use the MV of £1,400 in her claim to PMAs and can only claim WDA on this figure.

Example 2:

Dennis owns a violin which had cost £2,300 in 2009. In 2017, he realises his dream of becoming a professional musician. The violin is then worth £3,700. He must use the original cost of £2,300 in his claim to PMAs but can claim only WDA.
Remember that where a customer buys an asset partly for, or begins to use an asset partly for, non-business purposes and it is necessary to bring a disposal value to account, the PMAs are calculated separately. An example of this would be an asset an individual uses both privately and for their business. We covered that in subchapter 5.1.4.