Osborne 3 - Capital allowances

Question 1

Things to watch out for/ check carefully in computation of capital allowances

Answer 1

1. The relevant AIA £200K or £1M or straddle (2019/20/21 calendar years get £1M)
2. WDA - 8 or 6% or straddle? …. Reduced on 1/4/19

Question 2

When doing a computation of capital allowance for a long period split in 2 CAPS

Answer 2

1. The FULL amount of the purchase goes into the relevant CAP.. do not be apportioning this amount… it is the ALLOWANCE that needs apportioned. (FYA claimed, AIA claimed, WDA calc)

When WDA is apportioned you can eitherdo eg. 18% x 4/12 = 6% and then use that OR you can use 18% in the calc and then multiply the result by 4/12….. Same answer.

Question 3

What allowance for Zero emission goods vehicle

Answer 3

100% FYA

Question 4

Does motorbike qualify for AIA?

Answer 4

All forms of motor vehicles excluding cars will qualify for the Annual Investment Allowance

Question 5

What is deadline for making a Short life asset election?

Answer 5

A short life asset election must be made within two years,

Question 6

For large value items can a business can choose to claim up to the Annual Investment Allowance limit and make a short life asset election for the balance of expenditure?

Answer 6

No - A short life election is made separately for each qualifying item and in full

Question 7

How many years until its written down value must be transferred to main pool?

Answer 7

If not sold within eight years of the END of the accounting period in which it is purchased

Question 8

small pool writing down allowance ? use when?

Answer 8

When balance on GENERAL pool falls below £1000

Question 9

AIA

Answer 9

From 1/1/2016 - set permanently at £200K

3 Years 2019 / 2020 and now 2021 - £1,000,000

Question 10

Is funding method of the Asset relevant?

Answer 10

No - can be:

Cash in the bank

Loan

Hire purchase

FINANCE lease of at least 5 years

(Operating lease is treated revenue spend)

Question 11

What constitutes Plant & Machinery for CAs?

Answer 11

‘Apparatus with which’ the biz operates rather than assets ‘in which’ the biz operates. (eg. buildings)

Question 12

AIA

Answer 12

£1M for 2019,20,21
(So only have to deal with straddle if CAP began in 2018)

Group companies might have to share:
If share premises or had similar activities.

Question 13

Special rate pool used for?

Answer 13

Used for cars >110 g/kg (110 & less is General pool 18%)

Also used for certain Long life aSsets and ‘integral features’ (dunno what those are)

Question 14

FYA

Answer 14

• New low-emission cars (but examples don’t always seem to say ‘New’? and osborne quite clear that other cars that aren’t new and / or dont meet the def of Low emission dont get the FYA)
• New ZERO-emission goods vehicles
• Certain ‘energy efficient’ and ‘water efficient’ plant but ONLY if purchased before 1/4/20

Question 15

WDA special rate changed when?

How do you calculate ?

Answer 15

01/04/19

Straddle calc eg for CAP calendar year 2019:
3/12 x 8 = 2.0
9/12 x 6 = 4.5
Use 6.5

If it was a short period do the same eg:
3/12 x 8 = 2.0
6/12 x 6 = 3.0
Use 5.0 …. Remember do NOT then time-apportion this.

You WOULD time-apportion for a short CAP if you were not straddling eg.
Special rate pool subtotal is £2000 in a 9m CAP
2000 * 6% * 9/12 = 90

Hmmm
Ref Mat gives method:

8 * no of months before + 6 * no of months after
_____________
no of months in CAP

If using this method you WOULD still have to time-apportion

Question 16

When use Short Life Asset?

Answer 16

When there’s not enough AIA
When expect to dispose within 8 years
(Enables Bal All to be claimed)

If not sold within 8 years of the END of the CAP it was acquired in then transfer to Main pool & close SLA pool

Use a separate pool for each SLA

Watch out - remember because each is in separate pool , if sold, it will be a balancing allowance.

Easy to confuse with a special rate pool which might contain a car that gets sold … but really you don’t know whats all in a special pool so you don’t do Bal all here.

BUT:
If its a SOLE TRADER and they use the car personally then it goes in a Single asset pool and if sold you DO use balancing allowance!!! (Kaplan 17 sarah)

Question 17

When use small pools allowance?

Answer 17

When the SUBTOTAL in either the main pool or special rate pool is £1000 or less (I think this is before WDA)
You can claim the whole amount as ‘small pool allowance’

So I think when you total the columns thats when you check and if £1K or less do NOT calculate 18%/6% … just use ‘small pool allowance’ line same as ‘balancing allowance’

The Small Pool Allowance does NOT apply to Single asset pools (eg Short life assets)

Question 18

when doing the big Capital allowances:

still show the WDV b/f … just put in dashes

Answer 18

.

Question 19

When doing capital allowances AND adjusting profits - dont forget to deduct the capital allowance result from the profit along with the other adjustments!

Answer 19

.

Question 20

If doing CA big calc for a final period

what to remember ?

Answer 20

1. There is no AIA or WDA (not sure FYA but assume no and wouldnt make any diff)

If there’s any additions they don’t get AIA they just go in the pool.
The net result is the same but I think maybe loose a mark if do with AIA