Capital Allowances

Question 1

How do we decide if something is a plant?

Answer 1

“With which we carry on trade” - capital allowances
“Within which we trade” - no capital allowances

Question 2

Who is entitled to capital allowance?

Answer 2

Sole traders
Partnerships
Companies

Question 3

What is done when an owner brings personal assets?

Answer 3

Use the market value when brought into business

Question 4

What is the general rule for disposal value?

Answer 4

Disposal is the sale proceeds of the asset
Must be less than original cost
If given away/sold for less than mv, dv is mv on date of disposal

Question 5

What are the 5 steps to calculate the total allowances per accounting period?

Answer 5

Write columns out
1) Tax Written Down Value b/f
2) Add Additions
3) Less Disposals
4) Less WDA @ 18%
5) TWDV c/f

Question 6

What assets are included in the main pool?

Answer 6

All machinery, fixtures, fittings and equipment
Vans, forklifts, lorries, motorcycles
Cars with CO2 emissions < 50g/km after 6th April 2021

Question 7

What is WDA?

Answer 7

Writing down allowance
Calculated for time period x/12

Question 8

What are first year allowances?

Answer 8

Allowance given in period of account in which expenditure incurred
Not pro-rated

Question 9

What has a 100% first year allowance?

Answer 9

New/unused zero emission vehicles before 5 April 2025
Charging points for electric vehicles before 5 April 2025
New qualifying low emission cars - electric or 0g/km emissions

Question 10

What is the annual investment allowance?

Answer 10

Includes most plant and machinery, except cars
1,000,000 max allowance pro-rated

Question 11

What is the writing down amount for small pools?

Answer 11

< £1000 in pool - write it off

Question 12

How do we account for private use by sole trader/partner?

Answer 12

Separate pool per named asset
Only claim for business %

Question 13

What is a balancing charge and how is it calculated?

Answer 13

Asset sold in excess of its tax written down value - too many capital allowances
TWDV b/f - disposal = balancing charge
Deduct from other capital allowances

Question 14

What is a balancing allowance and how is it calculated?

Answer 14

Asset sold for less than tax written down value - too few capital allowances
TWDV b/f - disposal = balancing allowance
Only occurs in main pool when trade ceases

Question 15

What is included when trade ceases?

Answer 15

Only balancing adjustments