Capital allowances Flashcards
functionality test
test of whether an item used is apparatus used in carrying on a business or not
if it has a function it will be plan and CA can be claimed
if it is part of the setting in which the business is run then it will not be plant and CA cannot be claimed
buildings - list a - NOT qualifying as plant
walls, floors, ceilings, doors, gates, shutters, windows, stairs
mains services and systems for water, electricity and gas
waste disposal systems
sewerage and drainage systems
shafts or other similar structures
fire safety systems
buildings - list b - NOT qualifying as plant
any works involving the alteration of land
tunnel, bridge, viaduct etc
pavement, road, car park
canal or basin
dam, reservoirs etc
docks, harbours, wharfs
dikes and sea walls.
buildings - list c - WILL qualifying as plant
thermal insulation of buildings, personal security, integral features, software and rights to software
list c:
moveable partition walls
decorative assets provided for the enjoyment of the customer in hotels / restaurants etc
swimming pools inc diving boards and slides etc
many more in legislation
other qualifying expenditure
altering building for installation of P&M
demolition costs
thermal installation of buildings
integral features list (qualify as plant)
lifts, escalators and moving walkways
space heating systems
air conditioning and air cooling systems
hot and cold water systems (excluding toilet and kitchen facilities)
electric lighting, power systems and electrical wiring
external solar shading
when should you use market value instead of disposal value in a CA comp?
where the plant is sold for less than MV to someone who cannot claim CA
where plant is given away
where the trader stops using the plant in their business
date of plant acquisition exception rule
if the obligation to pay and the date in which the payment is required is more than 4 months then the date for the tax comp becomes the date the payment is required
if there is a split between obligation to pay and some is paid more than 4 months later then this should be apportioned and applied in the separate tax years if necessary
constructed plant and machinery rules
plant becomes property of the purchaser as it is being constructed
obligation to pay becomes unconditional when plant is certified by architect / engineer
therefore - expenditure is incurred on the date it is certified (CA can be claimed on this date)
EXCEPTION:
if plant becomes property before the end of an accounting period and is certified within 1 month from the end of the period - treat as if incurred immediately before end of accounting period
hp CA rules
treated as own asset when contract begins
claim CA from when asset is brought to use
4 month rule does not apply
if deposit/ initial payment is made in an earlier acc pd than when it is brought to use then CA can be claimed on the deposit/ initial payment in that period
CA can be claimed on the balance when it is brought into use
claimed on capital amount not interest
disclaiming CA
may be advantageous to disclaim if profits are low and could be covered by PA
the TWDV would be higher in next period and lead to a larger claim in future years
capital gains on disposal of plant & machinery
loss not allowable and relief has already been given through WDA
if a gain is made on plant on which CA have been claimed the gain is a chargeable gain
to calculate gain use normal rules and therefore if a wasting chattel (moveable plant) then the consider the 5/3 rule
wasting chattel disposal rule
if the disposal proceeds are more than 6k and the asset cost less than 6k:
the gain is the lower of:
- calculate the normal gain (proceeds - cost = gain)
- calculate 5/3*(gross proceeds - 6000)
if the lower value of the gain is less than 6k then it is exempt
if the asset is bought and sold for less than 6k then the asset is EXEMPT
FYA rules
- don’t time apportion
- FYA 130% only for companies not sole traders
- allowed on the following:
electric vehicle charging point before 6/4/25
zero emission goods vehicles before 6/4/25
P&M install at refuelling station for green energy supply/disposal before 1/4/25
electric or zero emission cars (<50g/km before 1/4/21) before 1/4/25 - allowed for R&D inc plant, machinery & buildings (but not land) used for purpose of carrying out research
AIA rules
- doesn’t apply to cars
- second hand rule does not apply
- if sole trader & in a partnership then both get AIA
- if sole trade with two connected trades only one AIA between the trades
connected trade - done in same building / similar trading activities - partnerships that include a company are not eligible for AIA
- no AIA or FYA if acquired from connected person
- no AIA or FYA if was a gift
special rate pool rules
- applies to :
integral features (can claim AIA)
thermal insulation (can claim AIA)
cars with CO2 emissions >50g/km
solar panels (can claim AIA) - allocate AIA to the SRP first
examples of fixtures
boiler / radiator
lifts and escalators
heating, lighting and electrical systems
alarm systems
sanitary appliances, and hot and cold water systems
telephone and data installations
if they also qualify as p&m then CA can be claimed
fixtures - property transactions
part of purchase is allocated to the building and part to the F&F
CA even with more than one owner cannot exceed the original cost of the fixture
if seller has claimed CA then purchaser is limited to the disposal value used by the seller
fixtures - property transactions - fixed value requirement
applies where fixtures are acquired in a building and the past owner was entitled to claim capital allowances
fixed value required EITHER:
- within 2 years of completion the buyer and seller jointly elect the proceeds - this cannot exceed original price or amount actually paid
- just and reasonable apportionment of sales proceeds to allocate amount to fixtures
apportionment must be ratified by a first tier tribunal (must be submitted within 2 years but ratification can exceed the 2 years)
if not completed in the time frame then no CA can be claimed for purchaser or any future purchasers
fixtures - property transactions - pooling requirement
can only claim CA on fixtures when purchasing property if pooling requirement is also met:
- seller has previously claimed FYA or AIA
- seller has allocated cost of fixture to a CA pool (even if no claim has been made, hmrc has been notified)
if fixture has not been pooled then no CA will be available to any purchaser
fixtures - property transactions - pre-commencement integral features
prior to 06/04/2008 could not claim CA
eg:
* general electrical and cold water systems
* external solar shading
purchaser cannot claim CA on these fixtures therefore just apportion amount and claim CA on the remainder if available
fixtures - property transactions - selling building / CGT implications
ignore if building sold at a profit
if sold at a loss fixtures that have claimed CA reduce the cost price by:
purchase price less disposal value
eg.
proceeds x
less cost x
less fixtures purchase price-disposal value (x)
x (x)
loss (x)
reduction in loss cannot result in a gain therefore in this case it would be nil
small pool rules
does not apply to single asset pool
£1000 must be scaled up or down for long or short acc pds
car rules
FYA if 0g/km emissions before 6/4/25 (50g/km before 6/4/21)
general pool if emissions between 1g/km-50g/km before 6/4/25 (51-110 before 6/4/21)
SRP if emissions over 50g/km before 6/4/25 (over 110g/km before 6/4/21)
do not qualify for AIA
