Chapter 7 - Capital Allowances Flashcards
Capital Allowances are available on what two types of capital expenditure?
Plant and machinary
What is the function test?
If the asset performs a function in the trade, it is plant
if the asset provided a setting in which the business is carried out, it is not plant (fixed walls, floors, ceilings, windows, starts or lift shafts)
What are three typical things that would be allocated to the special rate pool (6% written down allowance)?
Cars with CO2 emissions greater than 50g KM,
Long life assets (longer than 25 years)
Plant and machinary integral to buildings
What two types of asset get there own separate pool for each individual asset?
1) Assets with some private use by a sole trader or partner
2) Short Life Assets
What are the rules when considering Capital allowances on private use assets?
1) AUA, FYA or WDA is calculated in full and then apportioned to the business element of the asset
2) Each private use asset has its own column in your CA working
3) There will be a balancing allowance or charge, on disposal
How can short life assets be kept out of the main pool?
1) By making an irrevocable de-pooling election, as long as election to do so occurs by 31 January, 22 months after the relevant tax year ends
2) SLA qualify for AIA
3) If asset not disposed of within 8 years of the end of the basis period, then at the end of the next period it is transferred to main pool where it is written down as normal
What is the small pool limit?
£1,000 for every 12 month period
When do balacing charges occur for items in the main and special pools?
1) On the cessation of trade
2) Only when sales proceeds are less than the TWDV of the pool
What is the proforma for Capital Allowances in the year of cessation?
TWDV BF
Additions
(Disposals)
—————
Balancing allowance
What are the 6 steps when considering capital allowances?
1) How many columns are needed (Main Pool, Special Rate Pool, Short Life assets (one each), private use assets (one each ), first year allowances, AIA
2) Start with balances b/f
3) Record additions
4) Record disposals (disposal proceeds always limited to maximum of original cost)
5) if disposal proceeds exceed value of pool, work out balancing charge
6) Calculate AIA, FYA, WDA BA, BC
What qualifies for Structure and building allowances?
Offices
Retail and wholesale premises
Factories an warehouses
Walls, bridges an tunnels
What is Structure and buildings allowance?
SBA is an annual straight line allowance of 3% given over 33 years and 4 months
When an unused building is purchased from a developer, what is the qualifying expenditure for SBA allowance?
Price paid less the value of the land
How is SBA time apportioned?
SBA can be claimed for the period from being brought into qualifying use and Y/E
What happens to the SBA if a building/structure that originally qualified for SBA is sold?
No balancing charge, purchaser continues to claim SBA for remainder of 33 years and 4 month based on original cost
Allowances that have been claimed are added to sales proceeds
