Business tax chapter 3 Flashcards
What is revenue expenditure?
Day to day costs of running a business
What is capital expenditure?
Purchase or improvement of non-current assets
List the types of allowable expenditure
1) Office furniture and moveable items
2) Machinery and equipment both moveable and fixed
3) Computers and other electronic equipment
4) Motor vehicles
5) Surveillance equipment
6) Fire and burglar alarm systems
7) Sprinkler systems
8) Moveable partitions
9) Swimming pools
10) Specialist sound insulation
11) Fish tanks, zoo cages
Items that are not allowable as plant and machinery are “Fixed office partitioning”.
What are the three way capital allowances can be given?
1) Annual Investment Allowance
2) First Year Allowances
3) Writing Down Allowances
AIAs, FYAs and WDAs
How do capital allowances differ between sole traders & partnerships and limited companies?
For a sole trader or a partnership the capital allowance dates and calculation will match the accounting period - i.e. if the accounting period is longer or shorter than 12 months the capital allowance will be scaled up or down.
For limited companies they could be scaled down but never up, because limited companies cannot have accounting periods which are longer than 12 months.
The annual investment allowance is £200,000 up to and including 31st December 2018 and £1,000,000 from January 2019. If Richard runs a bakery with a year ended 30 April 2019 and has bought plant and machinery in two instances - one on the 17th November 2018 for £225,000 and one on the 23 April for £165,000, how much annual investment allowance can be claimed?
The year ended 30 April 2019 covers to AIA periods - January 2018 -December 2018 and January 2019 to December 2019. Because of this, the AIA allowance for this straddling period needs to be calculated. Once we have this, we also need to check that no more than £200,000 is claimed before January 2019 because for the 2018 year, only £200,000 can be claimed. Any more than that is not allowed to be claimed.
1st May - 31st December = 8 months, 8/12 * 200,000 = £133,333
1st January - 30th April = 4 months, 4/12 * 1,000,000 = £333,334
So a total of £466,667 can be claimed.
£225,000 was spent on allowable AIAs in the 2018 year so £25,000 of this is not allowed to be claimed as AIA.
For what kind of assets are FYAs available for?
1) New low emission cars
2) Zero emission goods vehicles
3) Energy efficient plant
4) Water saving plant
