Capital Allowance Flashcards
Capital Allowance - Allow Flowchart
1) Is it **Revenue **expenditure
2) Special Legislation?
3) Integral Features
4) Incidental Alteration to a building
5) S21-23?
6) Plant **Tests **Satisfied? Function/Premises/Durability?
What are the 3 plant tests
Function: Active function or setting? **?.
Premises - Is it part of the premises? (Lord Hoffman and Wimpy)
- Separate visual identity?
- Permanently affixed?
- How complete are the premises without it?
**Durability **- 1) For an asset to be plant, it has to have a degree of permanence. >2 years accepted by HMRC
What is SBA?
Applies to non-residential constructions signed 29 October 2018 onwards.
Allowance on new non-residential buildings and structures, and renovation and conversion costs for existing buildings
3% from** 1/6 April 20** straight-line basis over 33 and 1/3 years (WDA is reducing-balance basis)
When do you not need to consider the meaning of plant derived from case law
If the asset falls within:
1) statutory exclusions, or
2) statutory inclusions,
However, if in List C in s23 you must not presume that the item is plant.
Case Law for:
Business/Function Test
**HORSE, BOAT, POOL, Lamps
**
1) Horse as Plant? Yes: V FRANCE
- Lord Lindley “fixed or moveable… live or dead… permanent employment in the business”
2) Ferryboat into a restaurant: YARD ARM
NOT PLANT - “Setting” the business was conducted and no function
3) Pool construction - “Active Function” Beach Station Caravans LTD
4) Lamps - “General Function” - not specific to business (Unless in nature of business) - Lyons
Case Law: Durability Test
Maden & Ireland on Shoes: knives and Lasts: >2 years
Case Law: Premises Test
1) Moveable Partitions: Plant because:
- they were part of the setting but were not part of the premises. commercial necessity means they were moveable
2) Decorative fixed screens - Did not permanently attach the screens to the building, so not premises
3) decor can be part of premises: Wimpy. Current approach for Premises test
Moveable Partitions: allowable?
Moveable partitions.
partitions were Plant because:
they were part of the setting but were not part of the premises.
as a matter of commercial necessity the partitions had to possess mobility and flexibility for the day-to-day running of the business and the company, in fact, moved them frequently.
they were apparatus with which the company carried on its business .
“Which of the following is a qualifying person for AIA?
1. A self-employed plumber.
2. A partnership comprising two brothers and their wives.
3. A trust whose beneficiaries are all minors.
4. A large public limited company (plc) listed on the London stock exchange. “
“1. A self-employed plumber is an individual and is a qualifying person for AIA purposes.
2. As each member of the partnership is an individual, the partnership is a qualifying person. The relationship between the partners is not relevant.
3. A trust is not a qualifying person, regardless of who the beneficiaries may be.
4. This company is a qualifying person. AIA is available to all customers regardless of size. It makes no difference that a company is large or that it is a listed company.”
Five general categories of expenditure are excluded from AIA.
“DCG - Ring Avoidance
1) Qualifying activity discontinued in chargeable year
2) Car expenditure
3) expenditure was Gifted or bought originally for non-business
4) Ring Fence trade
5) Expenditure on an asset linked to a change in a business whose sole benefit was to claim AIA m( some AIA company schemes maybe?)”
When does it matter if it’s a new building?
Special Exception: Insulation is on an old buiding or structure, doesn’t apply for new buildings
SBA: This is for new buildings that are non-residential.
What is S21?
PMA’s can’t be applied to anything which is a building or incorporated into a building.
Also in the “provision of a building”
EG: Leases
SBA - may be allowed though
Provide three examples of expenditure which s33A classifies as integral features expenditure.
Any three of the following.
* An electrical system, including a lighting system.
* A cold water system.
* A space or water heating system, a powered system of ventilation, air-cooling or air purification, and any floor or ceiling comprised in such a system.
* A lift, an escalator or a moving walkway.
* External solar shading.
In the context of s22, in which limited circumstances might a customer claim PMAs on expenditure involving the alteration of land?
S25 is only available for building alterations connected with the installation of plant or machinery, not land.
If a customer incurs expenditure on altering land for the sole purpose of installing plant or machinery, item 22 of List C treats that expenditure as unaffected by the provisions of s22.
What are the pools?
Single: include a short life asset, cars, ship and assets used only partly for business purposes
Class asset Pool - Includes: Special rate pool and expenditure on plant and machinery used for overseas leasing.
Main pool - Rate is 18% from April 2012.
Pool includes includes:
- balance of any expenditure on which the customer claimed AIA in the current period
- Claimed FYA in previous period
What are Class pools?
CAA01 now identifies only two class pools:
* Expenditure allocated to the special rate pool as per CAA01
* Overseas leasing of PMA (complicated and not covered in the manuals - see a specialist)
Dry Docks - Who and what?
Barclay Curle
Function Test
Structures can be plant if it has an active function
‘The only reason why a structure should also be plant is that it fulfils the function of plant in the trader’s operations.
Differences in Accounting and Taxation for Capital Allowances?
Accounts are prepared to GAAP
The treatment in the accounts does not, however, determine the question of whether expenditure is capital or revenue.
Not every expense that is properly charged in the profit and loss account according to GAAP is deductible for Income Tax
