Capital Allowances Flashcards by Harry Lockyer

CA: Depreciation treatment

Added back
Then replaced with capital allowances

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Capital allowances

Depreciation for tax purposes
(Standard rates so less subjective)

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CA: Qualifying Assets

Plant and machinery

(Expenditure on commercial structures and buildings qualifies for another type but not tested in PTX)

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CA: Plant and machinery definition

Assets
Which which the business operates
(E.g. petrol pumps)
Not in which the business operates
(E.g. garage)

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CA: Machinery includes

Machines
Motor vehicles
Computers

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CA: Plant includes

Fixtures and fittings
Furniture
Equipment

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Other things that qualify for capital allowances (from case law)

Building alterations incidental to instillation of plant and machinery

Licences to use computer software

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The two pools of plant and machinery

Private use asset pools
Main/general pool

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Private use asset pools: Treatment

Only business use proportion of the allowance can be claimed

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Main/general pool: Includes

Cars

With CO2 emissions of
Not more than
50g/km

Purchased
On or after
6 April 2022
(1st April for companies)

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Tax equivalent of the carrying amount

TWDV

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TWDV

Tax written down value

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The four types of capital allowances

WDA
AIA
FYA
Balancing adjustments

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WDA

Writing down allowances

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WDA availability

Annually

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AIA

Annual investment allowance

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AIA availability

On certain assets
At the period of acquisition

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FYA

First year allowance

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FYA availability

Certain assets
In period of acquisition

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CA: Balancing adjustments: May arise when

Period of disposal

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WDA given when

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End of the period of account
(On the balance of the main pool)

WDA calculation

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18% x TWDV

(Claimed as a capital allowance and deducted from the pool balance)

CA: What happens to the remaining pool balance?

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Carried forward as the TWDV at the start of the next period of account
Continues to be written down on a reducing balance basis

AIA offers what relief

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100%

On qualifying expenditure
In the year of purchase
Up to a maximum

Maximum AIA allowance for the exam

£200,000

What can the AIA be used against

Any assets Purchased in the year That would be allocated to the main pool Except assets 1. Qualifying for 100% FYA 2. And cars

Can unused AIA be carried forward?

What happens if expenditure exceeds available AIA?

Balance is eligible for the 18% WDA By transferring it into the main pool Before calculating the WDA for the period

FYAs relief percentage

100%

FYA timing

In first year of purchase

FYA applicability

1. New and unused Zero emission Cars And goods vehicles 2. Charging points for electric vehicles

WDAs and AIAs for periods of accounts

Time apportioned accordingly

Are WDAs and AIA restricted by reference to the length of ownership of an asset in the period of account?

FYAs for different lengths of accounting period

Never time apportioned

FYAs for length of ownership of an asset in the period of account

Never time apportion

Disposals from the main pool when asset sold deduction

Before giving WDAs for the period: Deduct The lower of: 1. Disposals proceeds 2. Original cost

Disposals from the main pool when asset not sold process: Asset permanently removed from business by owner (to only be used privately from now on)

Market value on the date of transfer

Disposals from the main pool when asset not sold process: Asset scrapped/destroyed

Scrap value /compensation received

What to do if the disposal of an asset from the main pool makes the pool balance negative.

Excess recovered and charged as tax via a balancing charge (Because too many allowances had been claimed in the past) (Reduces CA claim for period)

If there is an overall net BC?

Added to the tax adjusted trading profit

Small pool WDA amount *Not in tax tables*

£1,000

If the balance in the main pool on which the WDA is to be calculated is less than the small pool WDA amount

Whole amount can be claimed at once (Rather than having to write down at 18%)

Small pool WDA on private use assets

Not available

Small pool WDA for non 12m accounting periods

Time apportioned

CA: Private use assets definition

Owner of business has private use of the asset (Not an employee)

CA: Private use asset treatment

1. Separate column for each private use asset 2. Calculate allowances as normal 3. Only claim the business proportion

CA: When private use assets are sold: deduction

Deduct the lower of: 1. Disposal proceeds (Actual or deemed) (Like for main pool) 2. Original cost

Private use assets: Pool balance is negative (Disposal value exceeds TWDV b/f)

Balancing charge (As too many allowances claimed in last)

Private use assets: Pool balance is positive (TWDV b/f exceeds disposal value)

Balancing ALLOWANCE (As insufficient allowance claimed in past)

Private use asset balancing adjustments what to remember

Adjustments proportioned to business amount as usual

Is AIA, WDA or FYA available in final period of account when trade is ceased?

Cessation of trade: CA calculation

1. Add in Any additions Made in final period 2. Deduct Any disposals Made in final period 3. Calculate balancing adjustment On each pool The bring the TWDV c/f On each pool To zero

Capital Allowances Flashcards

(52 cards)