BTAX Business Taxation

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Presentation transcript:

BTAX Business Taxation Session 2: Corporation Tax: Capital Allowances

Capital Allowances: Topics General Rules Definition of Plant Pooled expenditure Writing down allowances First year allowances Annual Investment Allowance Disposal of assets Small balance in general pool Summaries Remainder of chapter next week CAs

General Rules Allowance given for Capital items used by business Plant & Machinery Allowance (PMA) is examinable Allowance given for each Chargeable Accounting Period (CAP) for companies CAs

Definition of Plant & Machinery What is Plant and Machinery? Can only claim for items defined by Statute or Case Law: cannot claim for any items not covered, even if capitalised in accounts. Note NO allowance for buildings and property CAs

Pooled expenditure Everything goes into general pool (main pool) except: Items dealt with in Special Rate Pool Short Life Assets CAs

Special Rate Pool What goes in the special rate pool? CAs

Short life assets What is a short life asset? How are short-life assets treated? CAs

Writing Down Allowances on Plant & Machinery How much are the WDAs? Adjusted for periods ≠ 12 months Question 2.1 CAs

New machinery: First Year Allowance What assets qualify for FYA? How does it work? CAs

New equipment: Annual Investment Allowance How much is the AIA? What assets do not get AIA? Question 2.3 CAs

AIA in CAPS straddling 1/1/16 Based on proportions of each limit E.g. for 1st Feb 2015 – 31st Jan 2016 £500,000 x 11/12 = £458,333 £200,000 x 1/12 = £2,083 AIA for whole CAP £460,416 Restriction on purchases between 1/1/16 and 31/1/16 of £2,083 Questions 2.5a 2.5b CAs

Disposal of assets Sale proceeds deducted from pool Restricted to original cost Balancing charge if a negative balance results Demonstrate Example page 3.8: Simple Company Students practice Page 3.21: 3.1 Students practice Anvil from hand out CAs

Disposal of Short Life Assets What is different about the disposal of SLAs? Demonstrate Example page 3.8: Simple Company Students practice Page 3.21: 3.1 Students practice Anvil from hand out CAs

Cease trading Only Balancing Allowances in year of cessation of trade Disposal of all assets Balancing Allowance or Balancing Charge to achieve zero balance Question 2.7 Demonstrate Example page 3.8: Simple Company Students practice Page 3.21: 3.1 Students practice Anvil from hand out CAs

Small balance on general pool What is the rule for small balances? CAs

Capital Allowances: Short periods Writing Down Allowances (WDA) are time-apportioned Annual Investment Allowance (AIA) is time apportioned First Year Allowances, Balancing Allowances & Balancing Charges are unaffected Company long & short

Capital Allowances: Long Periods 12 month CAP, followed by short CAP Capital Allowances calculated separately for each CAP Company long & short

Motor Cars : after April 2013 CO2 emissions less than 76 g/km – 100% FYA CO2 emissions between 76 – 130 g/km – general pool CO2 emissions more than 130 g/km – special rate pool CAs

Homework Tutorial book questions 3.1, 3.2, 3.3, 3.4, 3.5 Make notes from chapter 3