Capital Allowances & balancing allowance/charge - The Book-keepers Forum (UK)

Lyndsey · Senior Member

Capital Allowances & balancing allowance/charge

Don Tax · Expert

Sounds like a short period of accounts.

AIA and WDA are reduced in proportion to the chargeable period
EG. Start date 5.1.2011 - Accounting date 5.4.2011 AIA maximum (£100k / 12 x 3 months = 25k)

FYA is not adjusted for longer or shorter periods.

http://www.hmrc.gov.uk/manuals/camanual/CA23085.htm

Spamkebab · Expert

Timbo, how the devil are you, where the flippin eck have you been hiding?

Your answer is correct, in case you were winging it lol. I'm studying Business tax too at the moment so your reply was appreciated.

Cheers

Neil.

P.S you have the wrong coloured hat on, that seems to be HMRC coloured lol.

Don Tax · Expert

Purty good m8 - still here pretending I know how to operate a computer.

I didn't know you were doing business tax yet so best of luck with that. Did you do the personal syllabus?

My hat is one of those multi-coloured ones with bells.

Spamkebab · Expert

I'm taking the Personal Tax exam next Thursday, just for a break from it i've started the Business Tax study book.

Because that's the kind of thing i do when i need a break lol.

You'll be telling me you play the Lute next.

Don Tax · Expert

Definitely entering the dark side when having a break means delving into capital allowances and a new, literal meaning of 'tax credits'. Now you have all those balances and profits, what to do with them - I know, tax them. And badges of trade - i'm almost jealous.

Gosh, I'm feeling schizophrenic - court jester and mafia boss in 24 hours.

Spamkebab · Expert

As i near the end of AAT i am gaining more interest in working in practice. The reason for wanting to work in industry (when i first started out) was because of running this business i'm in now. It's tiring and unrewarding. I have a feeling this may not be the case in another profession.

Is it practice or practise?

Is is a verb or a noun?

Here we go again.

Neil.

Don Tax · Expert

I know, similar meaning and similar spelling so I prob got it wrong. It's one of those I always need to look up; literally as the certificate is spelt with an S. If we had to invent a language, it wouldn't be English. blankstare

Don Tax · Expert

Q - Self employed person buys equipment to start up their business - equip = 20,000, Van = 38,000 (2010/11). Then decides to close business Sep 2012, selling the van for £15,000 and scrapping equipment.
Am I right in thinking for 2010/11 he can claim the full expenditure of £58,000 as his AIA (as under the £100k), leaving £0 in the pool for next year.
Hi Lyndsey, yes, with the period qualification in my first post.
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2011/12 he has £0 in pool then deduct the value of the sale £15,000, therefore causing a "balancing charge". What happens with this balancing charge? Is this added to the net taxable profit for year & taxed at income tax rate?
Yes, it's taxed at the various income tax rates after deducting personal allowances and any other reliefs.
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The question also states that "assume that he claims for temporary 40% First Year Allowance in 2011/12" - what would this mean?
I was 'winging it' a little in my first answer lol. Presumably, there has been further equipment bought.
Further thought: Did he make enough profit to warrant claiming all the 58k AIA?
Let us know how you go on with the question or if there are further aspects to consider.
Best regards,
Tim