Chapter 3: Sole Traders - Capital allowance (Summary)s

Question 1

AIA

%?
Limit?
Pro Rate?
Qualifying Assets?

Answer 1

100% allowance

Limit £1m

Pro rate for long or short periods

Not cars and special rate assets

Question 2

WDA

%?
Limit?
Pro Rate?
Qualifying Assets?

Answer 2

18%

Over £1m

Pro rate for long or short periods

Cars up to and including 50g/km

Question 3

FYA

%?
Limit?
Pro Rate?
Qualifying Assets?

Answer 3

100%

No limit

Cars 0g/km

No time apportioned

Question 4

SRP

%?
Limit?
Pro Rate?
Qualifying Assets?

Answer 4

6%

no max

Cars over 50g/km

Pro rate - yes

Question 5

If there are Plant and machinery and special rate assets with a combined total of over £1m, how would you claim this?

For example,

P&M - £900,000
Special Rate assets - £200,000

Answer 5

AIA
Special Rate Assets - £200,000
P&M - £800,000

WDV
P&M - £100,000

Prioritize Special rate assets getting the full AIA as the General Pool is 18% rather than the special rate pool getting 6%

Question 6

Private use of assets - key point

The TWDV c/fwd after a private use

Answer 6

Full amount of WDA is deducted not just the private use.

Question 7

Private use of asset by employee

Answer 7

No private use adjustment by an employee

Question 8

Private use of an asset

Answer 8

Goes into its own column

Question 9

What costs are allowable for the structure and building allowance?

Answer 9

Cost is the construction cost of the structure or building which includes:

-fees for design
-Preparing site for construction
-Construction works
-Renovation, Repair and Conversion Costs
-Fitting out works

If bought from a developer, 3% is based on acquisition cost (Excluding land)

Question 10

Which costs are not allowable for structure and building allowance?

Answer 10

• Land acquisition including stamp duty and legal fees
  -any items which qualify for plant and machinery capital allowances
  -Planning permission
  -Financing, such as loans
  -Landscaping

Question 11

What is the date in which ONLY allowances can be claimed - structure and building allowance

Answer 11

The date the building first comes into use.

Time apportion if comes into use part way through an accounting period

Question 12

Companies v sole trader

main diff

Answer 12

-Private use of assets
-Super deduction
-max length for companies is 12 months

Question 13

General Pool / special rate pool

balancing charge / balancing allowance

Answer 13

Balancing Charge whenever the pool balance becomes negative after accounting for disposal

Balancing Allowance only arise on cessation of trade (and then only when the sale proceeds are less than the TWDV of the pool)

Claim WDA each year even if all the assets have been disposed

Question 14

Single Pool Assets (private use assets)

Balancing charge / balancing allowance

Answer 14

Disposal proceeds are higher than the TWDV :
Balancing charge as too many allowances have been taken in prior years - increase taxable profits

Disposal proceeds are lower than the TWDV:
Balancing allowance - not enough allowances taken. Reduce taxable profits

assets with private use - amount taken to allowances claimed column will be business use proportion

Question 15

Private use of an asset qualifying for AIA or FYA

Answer 15

only business proportion of the value can be claimed as AIA/FYA

whole value of the asset is included when determining if AIA limit is been reached

Question 16

How to account for disposals

Answer 16

Lower of original cost and sale proceeds