Capital Allowances Flashcards

1
Q

Capital Allowances: Long life assets definition

A

Plant and machinery

  1. With an expected working life of
    Over 25y

AND

  1. Total cost in a 12m accounting period
    Over 100k
    (Can time-apportion)
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2
Q

Capital Allowances: Long life assets: What can’t be classified as a long life asset?

A
  1. Cars
  2. Ships

P&M used in:
a. Retail shops
b. Showrooms
c. Offices
d. Hotels
e. Houses

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3
Q

Capital Allowances: What should you first allocate the AIA to, in ortder to be tax effcient?

A

The SRP

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4
Q

Capital Allowances: Do you time-apportion the AIA?

A

Yes

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5
Q

Capital Allowances: Do you time-apportion WDAs?

A

Yes

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6
Q

Capital Allowances: Do you time-apportion FYAs?

A

No

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7
Q

Capital Allowances: Treatment when a trader CAN reclaim VAT on the asset?

A

Include NET of VAT

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8
Q

Capital Allowances: Treatment when a trader CAN’T reclaim VAT on the asset?
E.g. Cars

A

VAT INCLUSIVE

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9
Q

Capital Allowances: In the exam, should you assume VAT has been treated incorreclty?

A

No

Assume the correct VAT treatment has been applied

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10
Q

Capital Allowances: Short Life Asset definition

A

Expected to be used for less than 8y

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11
Q

Capital Allowances: What to do if a short life asset is used for more than 8y?
I.e. by the end of eight years after the end of the basis period (AP for companies)

A

Transferred to main pool
At TWDV

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12
Q

Capital Allowances: What to consider when I notice:
Commercial buildings/structures
Assets being built by the business itself

A

Structures and buildings allowances (OBT)

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13
Q

Capital Allowances: Does land qualify for structures and buildings allowances?

A

No

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14
Q

Capital Allowances: Does stamp duty qualify for structures and buildings allowances?

A

No

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15
Q

Capital Allowances: Do planning permission costs and professional fees qualify for structures and buildings allowances?

A

No

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16
Q

Capital Allowances: Main rule for structures and buildings allowances?

A

Must be non-residential use

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17
Q

Capital Allowances: Structures and buildings allowance: What to do if a building is partly used for trade and partly rented?

A

SBA apportioned
(Between trading profits and rental income)

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18
Q

Capital Allowances: Do buildings which function as dwellings apply for structures and buildings allowances?
E.g. student accommodation
Prisons
Military accommodatoin
Holiday lets

A

No

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19
Q

Capital Allowances: Is the SBA time-apportioned?

A

Yes

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20
Q

Capital Allowances: Do assets not yet brought into use apply for structures and buildings allowances?

A

No

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21
Q

Capital Allowances: Are capital allowances available on the cost of structures and buildings? (As well as SBA)

A

No

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22
Q

Capital Allowances: Are capital allowances available on the cost of plant and machinery? (As well as SBA)

A

Yes

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23
Q

Capital Allowances: SBA: Treatment on the asset’s disposal

A

Proceeds received by the seller
Increased by the SBAs claimed to date
(For chargeable gains purposes)

Buyer takes over the remainder of the SBA period
And
Receives SBAs based on the original cost of the asset

(There is no balancing adjustment for the seller)

24
Q

Capital Allowances are the tax version of depreciation on what?

A

PLANT AND MACHINERY

25
Q

Capital Allowances: P&M definition

A

With which not in which

E.g. cars, computers, fixtures, fittings, furniture, equipment

26
Q

Capital Allowances: Is thermal insulation of a building P&M?

A

Yes

27
Q

Capital Allowances: Is building alterations incidental to installation of P&M, P&M?

A

Yes

28
Q

Capital Allowances: Is a licence to use computer software P&M?

A

Yes

29
Q

Capital Allowances: Is fire safety equipment P&M?

A

Yes

30
Q

Capital Allowances: Is movable office partitioning P&M?

A

Yes

31
Q

Capital Allowances: Is free standing decorative screens P&M?

A

Yes

32
Q

Capital Allowances: Is a dry dock P&M?

A

Yes

33
Q

Capital Allowances: Is a swimming pool at a caravan park P&M?

A

Yes

34
Q

Capital Allowances: Are light fittings, decor, murals etc. in a hotel - to create atmosphere - P&M?

A

Yes

35
Q

Capital Allowances: Is special display lighting P&M?

A

Yes

36
Q

Capital Allowances: Is a ship used as a floating restaurant P&M?

A

No

37
Q

Capital Allowances: Is a football ground stand P&M?

A

No

38
Q

Capital Allowances: Is a false ceiling P&M?

A

No

39
Q

Capital Allowances: Are shop fronts, tiles, water tanks, staircases and raised floors in a restaurant P&M?

A

No

40
Q

Capital Allowances: Is a petrol station canopy P&M?

A

No

41
Q

Capital Allowances: Is building housing car wash machinery P&M?

A

No

42
Q

Capital Allowances: Is pre-trading capital expenditure eligible for capital allowances?

A

Yes

43
Q

Capital Allowances: Capital Allowances: How is pre-trading capital expenditure trested

A

As if incurred on first day of trading

44
Q

Capital Allowances: What to look up if an asset is zero emission?

A

FYA

45
Q

Capital Allowances: What to watch out for with cars?

A

Do they enter the main pool or FYA

46
Q

Capital Allowances: What can be done for pools under 1k?

A

WDA

47
Q

Capital Allowances: Disposals from the main or special rate pool: Treatment

A

Deduct the LOWER of:

1. Proceeds

2. Original cost

(Before giving WDA)

48
Q

Capital Allowances: What to remember when encountered with:
1. Private use assets (By the owner)
2. Short life assets

A

Single Asset Pool (OBT)

49
Q

Capital Allowances: Disposal of asset: From single asset pool: Proceeds greater than TWDV

A

Balancing CHARGE

50
Q

Capital Allowances: Disposal of asset: From single asset pool: Proceeds less than TWDV

A

Balancing ALLOWANCE

51
Q

Capital Allowances: Disposal of asset: From single asset pool: Can any non-business proportion be claimed?

A

No

52
Q

Capital Allowances: Disposal of asset: From main or special rate pool: Which (balancing) allowances apply?

A

NONE

(Unless ceasing to trade)

53
Q

Capital Allowances: Disposal of asset: From main or special rate pool: Which (balancing) charges apply?

A

If the pool turns negative following a disposal

54
Q

Capital Allowances: Is AIA available in final period of account on cessation of trade?

A

No

55
Q

Capital Allowances: Is WDA available in final period of account on cessation of trade?

A

No

56
Q

Capital Allowances: Is FYA available in final period of account on cessation of trade?

A

No

57
Q

Capital Allowances: Cessation of trade: Process

A
  1. Add: Additions (In the period)
  2. Deduct: Disposals (in the period)
  3. Calculate a balancing adjustment on each pool (To bring the TWDV c/f to zero)