CH6 Capital Allow - NEW

Question 1

We introduce a special rate pool here. What does this mean?

Answer 1

Its a smaller WDA of 6% (rather than 18%)

Question 2

The assets that go into the special rate pool (besides cars) are still eligible for?

Answer 2

AIA

Question 3

When do we time apportion the special WDA?

Answer 3

If the accounting period is less or more than 12 months

Question 4

Assets that go into the special rate pool (note this in in OBT) are?

Answer 4

integral features
long life assets
thermal insultation
solar panels
high emmission cars
cars with Co2 emmissions > 50g

Question 5

Integral features include?

Answer 5

Electrical systems, cold water systems, space or water heating systems, air cooling, lifts escalators, solar shading

Question 6

Long life assets are?

Answer 6

plant/machinary with an expected working life of atleast 25 years, and total cost in 12 month accounting period is over 100,000

Question 7

Specifically excluded from long life assets are?

Answer 7

cars
ships
plant and machinary used in retail shops, show rooms , offices, hotels, homes

Question 8

We have assets subject to AIA in both the main pool and special rate pool. Where do we prioritise first?

Answer 8

Special rate pool give this WDA is only 6%, thus leaving the 18% WDA will lead to > allowances

Question 9

There are two different treatments of capital allowances depending of VAT on purchases of plant & machinary are included. Explain what these are

Answer 9

If a trader cannot reclaim VAT on an asset, calculate capital allowance on the VAT inclusive price

If they can reclaim VAT, calculate capital allowance on VAT exclusive price

Question 10

E.g van is purchased £10,000 VAT inclusive where the owner is vat registered. Whats the price we apply cap allowances too?

Answer 10

VAT is 20%

10,000 * 100/120

Question 11

What are short life assets

Answer 11

Main pool assets expected to be used no more than 8 years

Question 12

Short life assets can be depooled, meaning?

Answer 12

They can leave the main pool and be in their own pool

Note a pool is created per asset

Question 13

If the asset after its 8 years has not been sold by the end of this, it can be transferred back to?

Answer 13

The main pool

Question 14

In an exam, if we receive a note about a new addition that is going to be sold shortly, we should?

Answer 14

De pool it

Question 15

In the past, capital allowances were only applicable to plant and machinary. However newly introduced is the SBA, standing for?

Answer 15

The structures and building allownances

Question 16

What is SBA applicable too?

Answer 16

NOT existing buildings, only new expenditure, where a contract to build was entered on or after 29 October 2018

Question 17

For SBA to qualify, buildings must be used for?

Answer 17

Trade of business, hence must be non residential

Question 18

Qualifying and non qualifying costs for SBA are?

Answer 18

Qualifying
- commercial buildings / structures e.g roads
- construction/conversions
- alterations to land
- ready built structure

Non Qualifying
- Land itself
- Exp qualifying for CA (i.e under plant and machinary)
- Legal fees / stamp duty

Question 19

SBA is calculated how?

Answer 19

3% of costs for 12 month accouting period, hence we must time apportion if its not used for the whole year

Question 20

Year ended 31 March 2024. One of costs incurred is for a factory building worth £140,000 which was brought into use at 1 Nov 2023.

Also have levelling of land of 4000.

Whats the SBA

Answer 20

Ye is 31 March 2024, but building has only been of use since 1 Nov 2023, which is 5 months

Thus SBA = 3% * (140,000 + 4000) * 5/12