Capital Allowances Deck Flashcards
(12 cards)
What do the following acronyms mean?
PMA
SBA
RDA
PMA: Plant and Machinery Allowance
SBA: Structures and Building Allowance
RDA: Research and Development Allowance
How is the tax relief from capital allowances recognised?
Tax relief is recognised through deductions in taxable profits, reducing the corporation tax liability.
How long is the tax relief associated with SBAs realised over?
33 1/3 years (3% per annum on a straight-line basis).
Can businesses claim capital allowances on residential property?
No, capital allowances generally cannot be claimed on residential properties, except for certain qualifying areas such as communal areas or furnished holiday lets.
What is the current corporation tax rate? And what was the corporation tax rate prior to April 2023?
Current rate (as of 2024): 25% for profits above £250,000.
Prior to April 2023: 19%.
Super-deduction and full expensing were introduced to accelerate the tax relief available for businesses. How long do they have to claim these accelerators before they fall into the normal 18% & 6% pools?
The super-deduction was available until 31 March 2023. After this, assets revert to the standard pools:
18% for main rate assets
6% for special rate assets
Where in a set of accounts do you look to spot a capital allowances opportunity, and what category do you want there to be additions in?
Look at the fixed asset register or the balance sheet under “Additions to Fixed Assets.” Focus on categories like plant, machinery, fixtures, and fittings.
What type of client are we looking for?
Businesses with high capital expenditure, particularly in areas like construction, manufacturing, retail, or office refurbishments.
What information do we need to request from a client that has just extended the property they own?
Details of the extension works (e.g., invoices, contracts).
Breakdown of costs.
Fixed asset register updates.
Floor plans or specifications of the extension.
A client has spent £1m fitting out their head office. The CA team tells you that around 40% of the costs will qualify as PMA. At the current corporation tax rate, what will the tax relief be?
PMA qualifying costs: £400,000 (40% of £1m).
Tax relief: £400,000 × 25% = £100,000.
A client has spent £1m fitting out their head office. If 40% of the costs qualify as PMA and 60% qualify for SBAs, how much tax relief will they receive annually from the SBA portion at the current corporation tax rate of 25%?
SBA qualifying costs: £600,000 (60% of £1m).
SBA annual relief: £600,000 × 3% = £18,000/year.
Tax relief: £18,000 × 25% = £4,500/year over 33 1/3 years.
If a client’s tax relief from a £1m office fit-out is estimated to be £100,000, what would you estimate the fee for completing the capital allowances work to be, assuming fees range from 1% to 5% of the identified tax relief?
Estimated fee: £1,000–£5,000 (1%-5% of £100,000).
