8. Capital allowances

Question 1

What does the proforma look like for the capital allowances tax computation?

Answer 1

PRESS EDIT CARD FOR FORMAT

                               Main pool Special pool Allowances
                      £                £                    £                 £ TWDF b/f                             X                  X Add. (no AIA/FYA)               X                  X AIA add.            X AIA                    (X)                                                        X
                                          0 Disposals                             (X)                (X) Balancing chg/allow            X/(X)                              X/(X)
                                          X                  X WDA at 18%                          (X)                                    X WDA at 6%                                              (X)                 X FYA add.            X FYA                    (X)
                                          0 TWDV c/f                              X                 X

Allowances X

Question 2

Explain the three main capital allowances
Reference:
- which are time apportioned?
- what assets qualify for each?

Answer 2

Written down allowance: annual depreciation charge on all main and special pool assets.

• Can be time apportioned
• Not claimed on assets receiving FYA

Annual investment allowance: £1,000,000 allowance on plant and machinery.

• Can be time apportioned
• Can’t be used on cars.

First year allowance: 100% allowance on new low emission cars (50g/km or less)
- Can’t be time apportioned

Question 3

What isnt examinable in the exam? What must be done to remove it?

Answer 3

Structure and Building allowances, add back in.

Question 4

How do you classify plant?

Answer 4

Has an ACTIVE FUNCTION in the bsiness.

Question 5

The special rate pool:

What does it include? (4)
What is the WDA?

Answer 5

Includes:

• High emission cars (110g/km)
• Long life assets (25 years at least £100,000)
• Thermal insulation of a buiding
• Integral features of a building or structure.

WDA is 6%

Question 6

How does the private use of assets effect capital allowances?

Answer 6

SOLE TRADER ONLY

Private use by employee: no issue - full capital allowances available.
Private use by employer: Only applicable to business %

Question 7

What is the most beneficial order to claim AIA? (4)

Answer 7

• special rate pool
• main pool
• short life assets
• private use assets

Question 8

If the balance on the main or special pool is £1,000 or less before calculating WDA, what can be done?

Answer 8

• Balance can be claimed as WDA and written off

NOTE: 1,000 annual - time apportion

Question 9

What is a short life asset?

Answer 9

• All plant and machinery minus cars normally in main pool

- Intended to scrap or sell within 8 years

Question 10

How do you treat a short life asset?

Answer 10

• Separate column.
• Balancing charge in year of disposal
• If not disposed within 8 years, transfer back to main pool)
  (leads to greater allowances)

Question 11

Disposals are done at the?

Answer 11

LOWER of:

• sales proceeds
• cost