1.7 Temporary First-Year Allowances Flashcards
When and which ‘Act’ was Temporary FYA introduced?
In the (Finance Act) FA 2021
How can a company access the Temporary First-Year Allowance (FYA)? (i.e. what sort of expenditure)
Where a company incurs expenditure on qualifying plant and machinery.
What must the expenditure be in order to claim the Temporary FYAs? x3
- be incurred by a company between 1 April 2021 and 31 March 2023;
- be on new unused plant and machinery; and
- not be excluded expenditure (eg expenditure on cars)
How does the Temporary FYA relate to expenditure that would qualify for the general pool?
What is it referred to as?
Where the expenditure is on plant and machinery which would qualify for the general pool it is termed super-deduction expenditure and is eligible for a 130% FYA.
Referred to as a super-deduction.
How does the FYA relate to expenditure that would qualify for the special rate pool?
What is it referred to as?
Where the expenditure is on plant and machinery which would qualify for the special rate pool it is termed SR allowance expenditure and is eligible for a 50% FYA.
Referred to as an SR allowance.
When does expenditure not qualify for FYAs? re: a contract
Where the expenditure is incurred as a result of a contract entered into before 3 March 2021 it does not qualify for FYAs.
Draw the complete Capital Allowances pro forma for companies? Illustration
Illustration not available
What happens when the super-deduction expenditure is incurred prior to 1 April 2023 but the accounting period ends after that date?
What is it called?
A reduced super-deduction is available.
The rate is given by: 100 + 30 * N/AP
N is the length of the accounting period prior to 1 April 2023 and AP is the length of the accounting period.
For example, for the year ended 31 December 2023, the rate of the super-deduction will be: 100 + 30 * 3/12 = 107.5%
Called the REDUCED SUPER-DEDUCTION
What is the super-deduction?
The super-deduction is the Temporary First-Year Allowance at 130%.
What is the SR allowance?
When an asset is purchased that qualifies for the SR Allowance, how is it included in the CA comp?
The SR allowance is the Temporary First-Year Allowance at 50%.
- 50% is deducted from the FYA @ 50% pool
- 50% is transferred to the SRP
SEE: PAGE 10 ILLUSTRATION 3
What do you need to remember to do upon the acquisition of an asset that qualifies for the SR allowance? PLUS ILLUSTRATION
Remember to calculate the 6% WDA for the TWDV in the SRP before transferring 50% of the expenditure to the SRP as per the illustration
Illustration not available
When calculating the Capital Allowances what should never be totalled?
And why?
The FYA @ 130%
The allowance exceeds the qualifying expenditure
What do FYAs work alongside with?
And what care is necessary re: the above?
Work alongside the existing AIA.
Care is necessary to maximise the allowances which can be claimed.
SEE:
- PAGE 10 of QUESTIONS 2.6 re: SR Allowance
- PAGE 10 ILLUSTRATION 3
- QUESTION 20.4
