Chapter 6 - 1.1 - Capital Allowances Flashcards
1
Q
What are capital allowances?
A
A form of depreciation for tax purposes
2
Q
How are capital allowances less subjective than depreciation?
A
The allowances are calculated at standard rates that apply to all businesses and are therefore less subjective than depreciation
3
Q
What is the first step when calculating capital allowances?
A
Adjust profits for the accounting period (add back depreciation)
4
Q
What is the second step when calculating capital allowances?
A
Deduct capital allowances for that accounting period
5
Q
What do you get after following step 1 and 2?
A
Tax adjusted trading profit for the accounting period
6
Q
What is the third step when calculating capital allowances?
A
Apply the tax year basis (tax the profits arising in the tax year)
