Capital Allowances

• The business has ceased, how do I get a balancing allowance on the pool?

Go to Client followed by View and enter in a cessation date.

• I do not want to claim any capital allowances for this year / period, what do I do?

Business Tax automatically calculates the capital allowances for the period. To restrict these to zero:

Select Edit followed by Capital allowances and then C - Maintain. Select each asset in turn and amend the WDA/FYA field to zero.

Select E - Maintain pool and amend the WDA/FYA fields to zero.

• Business Tax is calculating a balancing charge on the general pool but the disposal proceeds do not exceed the balance brought forward plus all my additions.

In this case the company probably has some additions which qualify for first year allowances.

A balancing charge arises where the disposal value exceeds:

• • The unrelieved qualifying expenditure brought forward from the previous period, plus qualifying expenditure incurred in the period.

  • Expenditure incurred on assets where a FYA is being claimed only become qualifying expenditure at the start of the next period.

This means that if the disposal value exceeds the pool brought forward plus the non-FYA additions a balancing charge is incurred.

In such circumstances a company may be able to mitigate a potential balancing charge, either partly or completely, by not claiming FYAs on part of the expenditure.

Business Tax automatically calculates the balancing charge/allowances available. Users are now able to amend the WDV brought forward in the general pool if a balancing charge/allowance was claimed in error in the previous year.

• I have a short accounting period but the first year allowances are not being restricted.

The first year allowance, unlike the WDA, is a flat rate and should not be time apportioned.

• I have disposed of an asset for more than the original cost but the full disposal proceeds are not being brought into the capital allowances computation.  (Click again to close)

The disposal proceeds brought into the capital allowances computation should be restricted to the cost of the asset CAA 1990 s26(2).   

• Business Tax is giving FYAs but the asset / business is not entitled to them.

Carry out the following procedure:

Select Edit | Capital allowances | A - Maintain assets

Highlight the asset concerned and click Change asset.

Select the No FYA option and save the screen.

• How does Business Tax allowance the Annual Investment Allowance against additions?

Business Tax allocates the AIA against additions in the pools in the most tax efficient way firstly against additions in the special rate pool and then against additions in the general pool.

If there is still excess AIA unclaimed and the business has other non-pooled assets that qualify for the AIA then the user must used option C - Maintain to allocate the excess against these assets. The allowance should be allocated against assets based on which are likely to be retained in the business the longest.

• How is the hybrid rate calculated for chargeable periods spanning 1 April 2008?

Hybrid rate = (25 x BRD/CP) + (20 x ARD/CP)

Where the hybrid rate would be a figure with more than 2 decimal places, it is to be rounded up to the nearest second decimal place.

Definitions:

BRD - is the number of days in the chargeable period before the relevant date

ARD - is the number of days in the chargeable period on and after the relevant date

CP - is the number of days in the chargeable period.

The relevant date is:

(a) for corporation tax purposes, 1 April 2008, and

(b) for income tax purposes, 6 April 2008.