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PTX > Capital Allowances > Flashcards

Capital Allowances Flashcards

1
Q

CA: Depreciation treatment

A

Added back
Then replaced with capital allowances

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2
Q

Capital allowances

A

Depreciation for tax purposes
(Standard rates so less subjective)

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3
Q

CA: Qualifying Assets

A

Plant and machinery

(Expenditure on commercial structures and buildings qualifies for another type but not tested in PTX)

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4
Q

CA: Plant and machinery definition

A

Assets
Which which the business operates
(E.g. petrol pumps)
Not in which the business operates
(E.g. garage)

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5
Q

CA: Machinery includes

A

Machines
Motor vehicles
Computers

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6
Q

CA: Plant includes

A

Fixtures and fittings
Furniture
Equipment

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7
Q

Other things that qualify for capital allowances (from case law)

A

Building alterations incidental to instillation of plant and machinery

Licences to use computer software

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8
Q

The two pools of plant and machinery

A
  1. Private use asset pools
  2. Main/general pool
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9
Q

Private use asset pools: Treatment

A

Only business use proportion of the allowance can be claimed

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10
Q

Main/general pool: Includes

A

Cars

With CO2 emissions of
Not more than
50g/km

Purchased
On or after
6 April 2022
(1st April for companies)

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11
Q

Tax equivalent of the carrying amount

A

TWDV

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12
Q

TWDV

A

Tax written down value

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13
Q

The four types of capital allowances

A
  1. WDA
  2. AIA
  3. FYA
  4. Balancing adjustments
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14
Q

WDA

A

Writing down allowances

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15
Q

WDA availability

A

Annually

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16
Q

AIA

A

Annual investment allowance

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17
Q

AIA availability

A

On certain assets
At the period of acquisition

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18
Q

FYA

A

First year allowance

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19
Q

FYA availability

A

Certain assets
In period of acquisition

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20
Q

CA: Balancing adjustments: May arise when

A

Period of disposal

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21
Q

WDA given when

A

End of the period of account
(On the balance of the main pool)

22
Q

WDA calculation

A

18% x TWDV

(Claimed as a capital allowance and deducted from the pool balance)

23
Q

CA: What happens to the remaining pool balance?

A

Carried forward as the TWDV at the start of the next period of account
Continues to be written down on a reducing balance basis

24
Q

AIA offers what relief

A

100%

On qualifying expenditure
In the year of purchase
Up to a maximum

25
Q

Maximum AIA allowance for the exam

A

£200,000

26
Q

What can the AIA be used against

A

Any assets
Purchased in the year
That would be allocated to the main pool

Except assets
1. Qualifying for 100% FYA
2. And cars

27
Q

Can unused AIA be carried forward?

A

No

28
Q

What happens if expenditure exceeds available AIA?

A

Balance is eligible for the 18% WDA
By transferring it into the main pool
Before calculating the WDA for the period

29
Q

FYAs relief percentage

A

100%

30
Q

FYA timing

A

In first year of purchase

31
Q

FYA applicability

A
  1. New and unused
    Zero emission
    Cars
    And goods vehicles
  2. Charging points for electric vehicles
32
Q

WDAs and AIAs for periods of accounts

A

Time apportioned accordingly

33
Q

Are WDAs and AIA restricted by reference to the length of ownership of an asset in the period of account?

A

No

34
Q

FYAs for different lengths of accounting period

A

Never time apportioned

35
Q

FYAs for length of ownership of an asset in the period of account

A

Never time apportion

36
Q

Disposals from the main pool when asset sold deduction

A

Before giving WDAs for the period:

Deduct
The lower of:
1. Disposals proceeds
2. Original cost

37
Q

Disposals from the main pool when asset not sold process: Asset permanently removed from business by owner (to only be used privately from now on)

A

Market value on the date of transfer

38
Q

Disposals from the main pool when asset not sold process: Asset scrapped/destroyed

A

Scrap value
/compensation received

39
Q

What to do if the disposal of an asset from the main pool makes the pool balance negative.

A

Excess recovered and charged as tax via a balancing charge

(Because too many allowances had been claimed in the past)
(Reduces CA claim for period)

40
Q

If there is an overall net BC?

A

Added to the tax adjusted trading profit

41
Q

Small pool WDA amount
Not in tax tables

A

£1,000

42
Q

If the balance in the main pool on which the WDA is to be calculated is less than the small pool WDA amount

A

Whole amount can be claimed at once
(Rather than having to write down at 18%)

43
Q

Small pool WDA on private use assets

A

Not available

44
Q

Small pool WDA for non 12m accounting periods

A

Time apportioned

45
Q

CA: Private use assets definition

A

Owner of business has private use of the asset
(Not an employee)

46
Q

CA: Private use asset treatment

A
  1. Separate column for each private use asset
  2. Calculate allowances as normal
  3. Only claim the business proportion
47
Q

CA: When private use assets are sold: deduction

A

Deduct the lower of:

  1. Disposal proceeds
    (Actual or deemed)
    (Like for main pool)
  2. Original cost
48
Q

Private use assets: Pool balance is negative
(Disposal value exceeds TWDV b/f)

A

Balancing charge

(As too many allowances claimed in last)

49
Q

Private use assets: Pool balance is positive
(TWDV b/f exceeds disposal value)

A

Balancing ALLOWANCE

(As insufficient allowance claimed in past)

50
Q

Private use asset balancing adjustments what to remember

A

Adjustments proportioned to business amount as usual

51
Q

Is AIA, WDA or FYA available in final period of account when trade is ceased?

A

No

52
Q

Cessation of trade: CA calculation

A
  1. Add in
    Any additions
    Made in final period
  2. Deduct
    Any disposals
    Made in final period
  3. Calculate balancing adjustment
    On each pool
    The bring the TWDV c/f
    On each pool
    To zero

PTX (14 decks)

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