Week 4 - Capital Allowances Flashcards
What is the weighting of the mid-term?
30%
What weeks is the material for the mid-term?
Week 1 to week 6
What are capital allowances?
Capital allowances is a form of tax relief in which companies are allowed to deduct part of the cost of certain assets
What are the 4 types of capital allowances?
Writing down allowance (WDA)
Annual investment allowance (AIA)
First year allowance (FYA)
Balancing adjustment (BA)
What are the capital allowances that don’t go in the main pool? (Hint: election)
- Cars with CO2 emissions greater than 50g/km
- Assets used by the owner partly for private use
- Items that go in the special rate pool
- Assets in which a short life asset election have been made
What is the percentage for the WDA available each year?
18%
Can the AIA be used against cars?
No
If more than £1m is spent on qualifying assets, what does the remainder qualify for?
18%
What does TWVD b/f mean?
Tax Written Down Value brought forward
What are the conditions of WDA for capital allowances?
18% is what is available each year on the general pool
What are the conditions of AIA for capital allowances?
- 100% relief is available on £1m of expenditure
- Cannot be used against cars
- Can’t be used in year of cessation
What are the conditions of FYA for capital allowances?
- It is available in relation to expenditure on unused 0g/km cars
- Machinery for use in the refuelling of vehicles with natural gas, biofuel or hydrogen
- 0g/km goods vehicles
- Charging points for electric vehicles
What assets does the special rate pool include?
- Long life plant and machinery with an expected life of more than 25 years and the total cost in a year more than £100,000
- Integral features of a building
- Emission cars greater than 50g/km
- The WDA is 6%
What happens if the balance on the general pool/special rate pool is less than £1000?
Balance is written down to nil and allowances claimed
If there is a disposal, how is it shown in a capital allowance?
It is deducted first before the WDA is calculated
If assets are used privately, should they be put in a separate column? And is it deductible?
1)Yes and 2) No, only the business proportion should be deducted
When a private asset is disposed, what should happen with the sale amount if it is bigger or smaller than the TWDV?
Bigger - Extra amount is added back to the taxable profits
Smaller - The difference is allowed as an extra deduction
In the year of cessation, is there WDA, FYA and AIA?
No
What is the percentage for structures and buildings allowances (SBAs)?
3% per annum
When do SBAs at 3% cease?
400 months or when building is demolished or brought into residential use
What is the WDA percentage for patent rights?
25% per annum
