Module 6

Question 1

What two categories can capital allowances be split in two?

Answer 1

1) Plant and Machinery allowances

2) Structures and building allowance

Question 2

What type of expenditure qualifies for capital allowances?

Answer 2

All common items of business machinery and equipment will qualify for plant and machinery allowances.

For example:
- vehicles
- machinery
- office furniture
-IT equipment
- other moveable items of plant and machinery

Question 3

What expenditure does not qualify for capital allowances?

Answer 3

Plant or machinery does not include expenditure on a building

For example:
- Walls, floors, ceilings, doors, windows and stairs
- Mains services, and systems for water, electricity etc…
- Lift shafts

Question 4

What is the Annual Investment Allowance (AIA) and how much is it?

Answer 4

This is an allowance of 100% for the first £1,000,000 of expenditure in a given year.

Question 4

Capital allowances may also be claimed on:

Answer 4

1) the alteration of a building to install plant and machinery

2) demolition costs to remove / demolish plant and machinery

3) the thermal insulation of buildings.

Question 5

What is the standard trading capital allowance rate for plant and machinery? (WDA)

Answer 5

18%

Question 6

What is the First Year Allowance (FYA)?

Answer 6

First year allowances (FYA) – FYAs may be available on certain types of plant and machinery at a rate of 100% in the year of purchase.

Question 7

When does a balancing allowance occur?

Answer 7

A balancing allowance occurs when TWDV brought forward exceeds the proceeds of an asset as there is a positive balance on the pool. A balancing charge should be netted off against allowances in the same period.

This reduces taxable profits