Lecture 4 Flashcards
Differences between appreciation and capital allowances
Depreciation is calculate separately on each set of non-current assets e.g. buildings plant and machinery furniture&fixtures
For calculating capital allowance non-current assets a club in just five pools – rates are decided by HMRC
Main pool
Factory machines, office equipment,motor vehicles, motorcycles, lorries, motorcars (emission up to 110 G/KM))
Special pools
Building electric, heating system, cooling, water, motorcars (emission more than 110 G/KM)
Main pool percentage
WDA is 18% per annum
Special pool percentage
WDA is 6% per annum
WDA
Writing down allowance
Scaled up/down if the length of the chargeable period is more/less than 12 months
Not mandatory to claim maximum WDA
AIA
Annual investment allowance
Miscellaneous capital allowance
Available in relation to certain other categories of capital expenditure including:
- patent rights
- know how
- research & development and
Carryforward trade loss relief
I trading loss maybe carried Forward and set against
-The first available profits
– of the same trade
– no partial relief is allowed
Trade loss relief against total income
Taxpayer can choose to relieve the losses against the total income of the -current year only
- previous year only
- Of both years
- current year first and then the previous year
Relieving trade losses against capital gains
If a claim is made to set a trading loss against total income for the tax year, any unrelieved part of the loss may then be set against any capital gains of the year
Early trade losses relief
Losses incurred in the early years of trade may be carried forward against future trading profits/set against total income
Trading losses incurred in the first for 4 tax years may be carried back against total income in the three prior tax years
Terminal trade loss relief
A trade loss incurred in the last 12 months of trading can be set against the trading profits of the tax year in which the cessation occurs and the three previous tax years (later years first)
Partnership taxation’s
Each partner is tax individually on his/her share of profit - This will be their income
The trading profits for a period of account is split between the partners in accordance with their profit sharing agreement for the period
Partnership income
Step one – start with the adjusted trading profits of the partnership
Step 2- deduct salaries payable
Step 3-Deduct any interest payable
Step 4- distribute remaining profit in the given ratio
Step 5- the income computed above is the trading income of each partner and will be taxed in the respective tax year using the basis period rules
