1.8 Disposal of Enhanced First-Year Allowances

Question 1

1. What happens when an asset which the super deduction was claimed is disposed of? x2
2. What happens to the balancing charge that arises? And before what?
3. What does the percentage that is applied to the disposal value depend on?

Answer 1

1. the proceeds of disposal are not deducted from the general pool or the FYA@130% pool
2. a balancing charge arises equal to a percentage of the disposal value (proceeds).

(SEE: PAGE 2 QUESTION 1.4 & PAGE 11 ILLUSTRATION 4)

2. The balancing charge is added to the company’s tax adjusted profit before capital allowances.
3. It depends on when the accounting period of disposal begins or ends. i.e. if the AP of disposal ends before 1 April 2023, balancing charge is 130% of the proceeds. (REFERS TO THE REDUCED SUPER-DEDUCTION)

Question 2

What happens when an asset which the SR allowance was claimed is disposed of? x2

Answer 2

• 50% of the sales proceeds are deducted from the SRP; and
• 50% of the proceeds is a balancing charge regardless of the accounting period in which the disposal takes place.

SEE: PAGE 11 ILLUSTRATION 4

Question 3

What happens if only part of the original expenditure obtained the enhanced FYA at either 50% or 130% on disposal of an asset?

Answer 3

Only that proportion of the disposal proceeds give rise to a balancing charge.

Question 4

What is the Capital Allowances pro forma for companies? Plus Illustration

Which part of the pro forma is used for the disposal of asset that has claimed the SR allowance?

Which part of the pro forma is used when an asset is acquired where the SR allowance has been claimed?

Answer 4

Re: disposal, use the ‘Balancing adjustment’ part

Re: acquisition use the ‘Balance to SR pool’ part

ILLUSTRATION NOT AVAILABLE

Question 5

If an asset is disposed of where the 130% FYA was claimed, does the disposal value appear in the Capital Allowance comp?

If an asset is disposed of where the 50% FYA was claimed, does the total proceeds appear in the Capital Allowances comp?

(SEE: PAGE 11 ILLUSTRATION 4)

Answer 5

No.

No, only 50% of the proceeds are deducted from the SRP.

Question 6

If an asset is disposed of where the 50% FYA was claimed, what happens to 50% of the disposal proceeds that is not a balancing charge?

(SEE: PAGE 11 ILLUSTRATION 4)

Answer 6

It is deducted from the SRP before deducting the WDA.