Capital Allowances

Question 1

What are the four types of capital allowance?

Answer 1

1. Writing down allowances (WDA)
2. Annual investment allowance (AIA)
3. First year allowance (FYA)
4. Balancing adjustments

Question 2

What does capital allowance refer to?

Answer 2

Plant and machinery

Question 3

What does AIA apply to?

Answer 3

Any assets purchased in the year that would be allocated to the main pool, except assets qualifying for 100% FYA and cars

Question 4

What happens when expenditure exceeds the available AIA?

Answer 4

The balance is eligible for 17% WDA by transferring the balance to the main pool

Question 5

What is FYA available on?

Answer 5

1. New energy saving plant or machinery
2. New and unused low emission cars (electrically propelled cars, CO2 emissions of not more than 50g/km for cars purchased in the financial year/tax year 18-19)
3. New and unused low emission cars (electrically propelled cars, CO2 emissions of not more than 75g/km for cars purchased before the financial year/tax year 18-19)
4. New and unused zero emission goods vehicles
5. Charging points for electric vehicles

Question 6

When are WDAs and the AIA time apportioned?

Answer 6

1. Where there is a long or short period of account

2. Not restricted by reference to the length of ownership of an asset

Question 7

Which cost is deducted from the main pool when an item is disposed of?

Answer 7

The lower of disposal proceeds and original cost

Question 8

What happens when the main pool balance is negative?

Answer 8

Excess allowances must be recovered by charging tax by means of a balancing charge

Question 9

Which cost is deducted from a private pool when an item is disposed of?

Answer 9

Deduct the lower of disposal proceeds and original cost

Question 10

What happens when the balance in a private pool is negative after a disposal?

Answer 10

A balancing charge will apply

Question 11

What happens when the balance in a private pool is positive after a disposal?

Answer 11

A balancing allowance is given

Question 12

What happens when the balance in the main pool is £1000 or less?

Answer 12

Then the whole amount can be claimed

Question 13

What steps should be followed when a business is permanently discontinued?

Answer 13

1. Add in any additions
2. Deduct any disposals
3. Calculate a balancing adjustment on each pool