Capital Allownces

Question 1

Why are CAs used

Answer 1

Depreciation is not allowable for tax purposes, instead CAs are given to qualifying expenditure

To qualify for P&M CA must fulfil a function in the trade rather than be part of the setting

Deduced from tax adj profits to give taxable trading profits

Question 2

WDA pool

Answer 2

P&M allowances take the form of a WDA on qualifying expenditure

6% (special rate): applied to certain integral fixtures

18% (main rate): applied to other P&M

Expenditure is pooled
- 6% items in special rate poo
- 18% in main pool

Rates are then applied to the total balance in that pool including any unrelieved balance b/f from previous year

Question 3

FYA

Answer 3

Available when P&M (excl cars) are new and unused between 1 April 23 - 31 March 26

Main rate pool gets 100%

Special rate gets 50%

Question 4

AIA

Answer 4

AIA of 1m each business year, proportionately reduced

Expenditure over AIA limit will go into respective WDA pool

Question 5

AIA restrictions

Answer 5

1. Only one AIA each business year
2. Where an individual carries on two related trades the trader will decide only one AIA which can be allocated between the trades as they wish
3. Partnerships which include a company as the partner won’t qualify for the AIA
4. No 100% AIA or FYA available if acquired got a connected person
5. Groups get one AIA between them
6. Companies under common control only receive one AIA between them

Question 6

Small pool

Answer 6

Businesses with less than £1000 in main or special rate pool get to claim the full amount as WDA

Scaled down for short periods

Question 7

Random examples

Answer 7

Floor / fixed partitions = part of the building, SBA

Toilets/ washbasins = part of the building but used in trade so can be used to claim CA

Lighting = could argue it’s not an integral feature in resturants an used in ambience and decorative, qualifies for main pool in this case

Preliminaries = CA for cost of preliminaries can be apportion between the expenditure that qualifies for CA and the expenditure which does not

Question 8

Short life asset

Answer 8

Is a business acquires an asset it can elect to depool the asset and put it in its own separate column

Appropriate when the asset is not expected to last more than 8 years

Balancing allowance would arise if the asset is sold within the 8 year period