Capital Allowances - Lecture 5

Question 1

Capital Allowances

Answer 1

Given instead of depreciation as deduction

Question 2

Capital expenditure…

Answer 2

Not deductible expense when calculating trading profit

Question 3

Plant and machinery qualifies for capital allowances if

Answer 3

Used for trading purposes

Question 4

Buildings and land > capital allowances

Answer 4

Excluded

Question 5

Basic principle

Answer 5

Business will get tax relief for ‘net cost’ qualifying capital expenditure

Question 6

Main pool items

Answer 6

Everything not requiring individual column or special rate pool items

Question 7

Excluded from main pool (2)

Answer 7

• Assets used partly privately by owner

- Assets which have short life where election made

Question 8

Disposals

Answer 8

Lower of proceeds/ original cost deducted

Question 9

Balancing adjustments calculated only if

Answer 9

All assets sold in the pool

Question 10

Writing down allowance (WDA)

Answer 10

Given for accounting period, based upon reduced balance in main pool

Question 11

WDA for 12 month period

Answer 11

18%

Question 12

Maximum length for accounting period self-employed person for capital allowances

Answer 12

18 months

Question 13

Special rate pool includes (3)

Answer 13

• Cars with CO2 emissions > 130g/km
• Plant and machinery integral to building
• New assets with expected life > 25 years and total expenditure at least £100,000

Question 14

WDA for special rate pool

Answer 14

8%

Question 15

Enhanced Capital Allowance (ECA)

Answer 15

100% can be claimed on purchase of energy saving plant and machinery and cars <75g/km

Question 16

Annual Investment Allowance (AIA)

Answer 16

Available on first £200,000 spent on plant and machinery in 12 month period. Anything not ECA (not cars too).

Question 17

If positive balance remaining

Answer 17

Balancing allowance added to total column

Question 18

If negative balance remaining

Answer 18

Balancing charge deducted from total column

Question 19

If all assets in Main pool/ special rate pool sold

Answer 19

Balancing charge taken immediately. Balancing allowance subject to 18%/8% WDA.

Question 20

Private use asset columns

Answer 20

Separate one for each asset with element private use by self-employed person

Question 21

Private use asset > capital allowance claimed

Answer 21

Restricted to proportion of business usage

Question 22

Short life assets columns

Answer 22

Separate one for each asset

Question 23

Short life assets

Answer 23

Asset with expected life <10 years (not cars) and sale price expected to be less than purchase cost

Question 24

Short life assets not sold by 9 years

Answer 24

WDV transferred into main pool

Question 25

Short life assets WDA =

Answer 25

18%