ACCA F6 FA09 Study Text 2010

Подождите немного. Документ загружается.

Chapter 6: Capital allowances – plant and machinery

If the definition is satisfied, long life assets must be put into the special rate pool.

If the definition of a long life asset is not satisfied, the item of plant and machinery is

treated as a normal main pool asset.

5.4 The AIA

The AIA is available on assets qualifying for inclusion in the special rate pool, with

the exception of motor cars. This presents a business with a valuable tax planning

opportunity.

If the business has incurred capital expenditure in excess of £50,000, the AIA should

first be allocated to assets within the special rate pool as the rate of WDA for these

assets is lower than that available for main pool items. (In other words, the business

can allocate the AIA to whichever assets it chooses.)

5.5 FYAs

FYAs are not available on assets qualifying for inclusion in the special rate pool.

5.6 WDAs in the special rate pool

The WDA in the special rate pool is calculated using the reducing balance method in

the same way as for the main pool, except that the rate of WDA is 10% for a 12-

month period (not 20%).

The 10% must be time-apportioned if the accounting period is less than 12 months.

5.7 Balancing adjustments

The method of calculating balancing adjustments in the special rate pool is the same

as for the main pool:

 A balancing charge can occur in any accounting period.

 A balancing allowance can only occur on the cessation of trade.



Example

ZPP Ltd prepares its accounts to the 31 March 2010.

On 1 April 2009 the TWDVs brought forward were as follows:

£

Mainpool

24,000

Specialratepool 134,400

Paper F6 (UK): Taxation FA2009

136 Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides © EWP

During the year ZPP Ltd made the following acquisitions:

£

Newpackingmachine(May2009)

66,800

Deliveryvan(June2009) 14,500

Motorcar(July2009)(CO

2emissionsof170g/km) 18,000

Disposals made in the year were as follows:

£

Forklifttruck(soldforlessthancost)

3,600

The new packing machine is expected to have a useful working life of 30 years.

Required

Calculate the capital allowances available for the year ended 31 March 2010.



ZPPLtd‐Capitalallowances

–y/e31March2010

Main

pool

Special

ratepool

Total

allowances

£ £ £ £

TWDVb/f  24,000 134,400

Acquisitions(66,800+14,500) 81,300

18,000 

AIA

(50,000)

50,000



–

–––––

–

–––––––––––––––––––––––



 31,300

Disposals  (3,600) (Nil)

–

–––––

–

––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––

 20,400 152,400

WDA(20%)  (4,080)

4,080

WDA(10%)

(15,240) 15,240

FYA(40%) (12,520)

 12,520



–

–––––

–

–––––––––––––––––––––––



Transferredtopool (18,780) 18,780



–

–––––

–

–––––––––––––––––––––––

–

–––––

–

––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––

TWDVc/f  35,100 137,160

–

–––––

–

––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––

Totalallowancesavailable

81,840



–––––––––––––––––––––––––––––––

Notes

The packing machine has a life of ≥ 25 years. However, it cost < £100,000 and

therefore is not treated as a long life asset.

If it had been allocated to the special rate pool, it would be allocated the AIA in

preference to the delivery van.

The car does not qualify for either the AIA or a FYA.

Chapter 6: Capital allowances – plant and machinery

Cars

 The new rules for cars

 The old rules for expensive cars

 Private use

6 Cars

6.1 The new rules for cars

From 6 April 2009 (1 April 2009 for companies) the capital allowances system for

cars depends on the car’s CO

emissions:

 Cars with CO

emissions of no more than 110 grams per kilometre are treated as

main pool items, but qualify for a 100% FYA. The FYA is never time-apportioned.

 Cars with CO

emissions of 111 to 160 g/km qualify for a 20% WDA and should

therefore be allocated to the main pool.

 Cars with CO

emissions of more than 160 g/km qualify for a 10% WDA and

should therefore be allocated to the special rate pool.

Note that the term ‘car’ does not include lorries, vans, taxis and motorcycles. These

will be treated as main pool items unless there is an element of private use (see

later). They will also qualify for the annual investment allowance.



Example

ENA Ltd prepares its accounts to the 31 March 2010.

On 1 April 2009 the TWDVs brought forward were as follows:

£

Mainpool

44,000

Specialratepool 155,400

During the year ENA Ltd made the following acquisitions:

£

Motorcar(April2009)(CO

2emissionsof110g/km) 12,000

Motorcar(May2009)(CO2emissionsof130g/km) 14,500

Motorcar(July2009)(CO

2emissionsof170g/km) 18,000

Disposals made in the year were as follows:

£

Plant(soldforlessthancost)

3,600

Paper F6 (UK): Taxation FA2009

138 Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides © EWP

Required

Calculate the capital allowances available for the year ended 31 March 2010.



ENALtd‐Capital

allowances–y/e31March

2010

Main

pool

Special

ratepool

Total

allowances

£ £ £ £

TWDVb/f  44,000 155,400

Acquisitions  14,500 18,000 

Disposals

 (3,600) (Nil)

–

–––––

–

–––––––––––––––––––––––

–

–––––

–

––––––––––––––––––––––––––

–

 54,900 173,400

WDA(20%)  (10,980)

10,980

WDA(10%)

(17,340) 17,340

Addition 12,000



FYA(100%) (12,000)

 12,000

–

–––––

–

––––––––––––––––––––––

–

–––––

–

–––––––––––––––––––––––

–

–––––

–

––––––––––––––––––––––––––

–

TWDVc/f  43,920 156,060

–

–––––

–

–––––––––––––––––––––––

–

–––––

–

––––––––––––––––––––––––––

–

– –––––––––––––––––––––––––––––––

Totalallowancesavailable

40,320



–––––––––––––––––––––––––––––––

6.2 The old rules for expensive cars

Prior to 6 April 2009 (1 April 2009 for companies) the treatment of a car depended

on its cost.

Cars costing less than £12,000 were allocated to the main pool unless there was an

element of private use.

Cars costing more than £12,000 were described as expensive cars. They had special

rules which will continue to apply until 2014.

The calculation of WDAs on expensive cars

There must be a separate column in the proforma for each expensive car.

Expensive cars qualify for a WDA of 20%; however, this is restricted to a maximum

of £3,000 p.a. for each car. This maximum WDA must be time-apportioned if the

accounting period is less than or more than 12 months long.

The calculation of BAs and BCs on expensive cars

On the disposal of an expensive car, either a BA or a BC will arise, depending on

the comparison of the disposal value with the TWDV b/f for that expensive car.

If the disposal value is higher than the TWDV for the expensive car, a balancing

charge arises, which is a negative capital allowance.

Chapter 6: Capital allowances – plant and machinery

If the disposal value is less than the TWDV for the expensive car, a balancing

allowance arises, which is added to the total capital allowances available for the

period.

6.3 Private use

Private use of a car by an employee is irrelevant and has no effect on the WDA

available.

Private use of a car by the proprietor of the business is covered later.



Example

WXG Ltd prepares accounts for the nine months ended 31 December 2009. Its

TWDVs b/f were £31,000 on the main pool, £16,000 in respect of a BMW purchased

two years ago for the use of the sales manager and £25,000 in respect of a Peugeot

purchased one year ago for the finance director.

On 10 December 2009 the company sold the BMW for £11,600 and replaced it with a

Ford which cost £15,000. The new Ford has CO

emissions of 150 g/km. There are

no other additions.

Required

Calculate the capital allowances available for the nine months ended 31 December

2009.



Answer

WXGLtd‐Capitalallowances

–9monthsended31December2009

Main

pool

BMW Peugeot

Total

allowances

£ £

TWDVb/f 31,000 16,000 25,000

AcquisitionsnotqualifyingforFYAs

15,000

Disposals (Nil) (11,600) (Nil)

–

–––––

–

–––––––––––––––––––––––––

–

–––––

–

–––––––––––––––––––––––––

–

–––––––––––––––––––––––––––––––

46,000 4,400 25,000

Balancingallowance

(4,400)

4,400

–

–––––

–

–––––––––––––––––––––––––

Nil



–

–––––

–

–––––––––––––––––––––––––



Writingdownallowance(WDA)

(1):20%×£46,000×9/12



(6,900)



6,900

(2):restrictedto£3,000×9/12

(2,250) 2,250



–

–––––

–

–––––––––––––––––––––––––

–

–––––––––––––––––––––––––––––––

TWDVc/f 39,100

22,750



–

–––––

–

–––––––––––––––––––––––––

–

––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––

Totalallowancesavailable

13,550



––––––––––––––––––––––––––––––––

Paper F6 (UK): Taxation FA2009

140 Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides © EWP

Short life assets

 The treatment of short life assets

 The calculation of the AIA and FYA on short life assets

 The calculation of WDAs on short life assets

 The calculation of BAs and BCs on short life assets

 The tax planning opportunities of making the de-pooling election

7 Short life assets

7.1 The treatment of short life assets

Short life assets are defined as plant and machinery, other than cars, with a useful

economic life of less than five years (i.e. when they are purchased, the intention of

the business is to dispose of them within the following four accounting periods).

In the examination, the most common examples of short life assets are computers

and computer software.

Short life assets are treated as normal main pool items unless a de-pooling election

is made. Companies must make the election within two years of the end of the

accounting period in which the expenditure was incurred. Individuals have one

year after the 31 January following the end of the period of account in which the

expenditure was incurred.

If the de-pooling election is made in respect of a short life asset, instead of including

the asset in the main pool, a separate record is maintained for that asset. There

should be a separate column for the asset in the capital allowances computation

proforma.

If elections are made to de-pool several short life assets, a separate record is

maintained for each individual short life asset.

7.2 The calculation of the AIA and FYA on short life assets

Short life assets qualify for the AIA and 40% FYA in the same way as main pool

items.

7.3 The calculation of WDAs on short life assets

WDAs are claimed on short life assets in the same way and at the same rate as in the

main pool.

However, if the asset is not disposed of within four years of the end of the

accounting period in which it is acquired, the TWDV of the asset must be

transferred to the main pool.

Chapter 6: Capital allowances – plant and machinery

7.4 The calculation of BAs and BCs on short life assets

If the short life asset is disposed of within four years of the end of the accounting

period in which it is acquired, a BA or a BC will arise.

 If the disposal value is higher than the TWDV for the short life asset, a balancing

charge arises, which is a negative capital allowance.

 If the disposal value is less than the TWDV for the short life asset, a balancing

allowance arises, which is added to the total capital allowances available for the

period.

7.5 The tax planning opportunities of making the de-pooling election

The de-pooling election is optional and should only be made where it is anticipated

that the asset will be sold for less than its TWDV while it is being treated as a

separate short life asset.

The aim of de-pooling is to accelerate the capital allowances available on that asset

(i.e. allow the allowances to be claimed earlier), but the benefit does not crystallise

until the period of disposal.

Up to the disposal of the asset, the same amount of allowances will be claimed

whether or not the asset is de-pooled. However, on its disposal:

 if de-pooled and sold for less than its TWDV, a balancing allowance will arise

 if not de-pooled, the disposal value is deducted in the main pool and the

allowances for the remaining net cost of the asset will be claimed as WDAs on a

20% reducing balance basis over several years; no balancing allowance arises.

It is important to note that the de-pooling election would not be advantageous

where it is anticipated that the asset will be sold for more than its TWDV. This is

because the disposal would crystallise a balancing charge early, whereas the

deduction of the disposal value of this one asset from the main pool (which includes

the TWDVs of many other assets) would be unlikely to give rise to a balancing

charge.



Example

Y Ltd prepares its accounts to 31 March each year. On 1 November 2009 it

purchased a laptop computer and software for £3,200. It expects to have to replace

the computer with new technology in two years’ time.

Required

Calculate the capital allowance claims in respect of the computer for the four

accounting periods ending on 31 March 2013, both with and without the short life

asset (de-pooling) election, assuming that the computer is disposed of on 31 October

2011 for £950. Assume also that there is a substantial balance brought forward on

the main pool and that the AIA is not available.

Paper F6 (UK): Taxation FA2009

142 Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides © EWP



Answer

Shortlifeelectionmade

Shortlifeassetelection 

notmade

YLtd

Capitalallowances

Shortlife

asset

Total

allowances

Main

pool

Allowances re

thecomputer

y/e31March2010 £ £ £ £

TWDVb/f

X

Acquisitions 3,200

3,200

WDA(20%) (640) 640 (640) 640



–

–––––

–

–––––––––––––––––––––––

–

–––––

–

––––––––––––––––

–

––––––

TWDVc/f 2,560

2,560

y/e31March2011

WDA(20%) (512) 512 (512) 512



–

–––––

–

–––––––––––––––––––––––

–

–––––

–

–––––––––––––––––––––––

TWDVc/f 2,048

2,048

y/e31March2012

Disposal (950)

(950)



–

–––––

–

–––––––––––

–

–––––––––––

–

–––––

–

–––––––––––––––––––––––

1,098

Balancingallowance (1,098) 1,098

WDA(20%)

(220) 220



–

–––––

–

–––––––––––––––––––––––

–

–––––

–

–––––––––––––––––––––––

TWDVc/f Nil

878

y/e31March2013

WDA(20%) Nil Nil (176) 176



–

–––––

–

–––––––––––––––––––––––

–

–––––

–

–––––––––––––––––––––––

TWDVc/f Nil

702



–

–––––

–

–––––––––––––––––––––––

–

–––––

–

–––––––––––––––––––––––

–

–––––

–

––––––––––––––––––––––– ––––––––––––––––––––––––––––––

Totalallowancesclaimedtodate 2,250

1,548



–

–––––

–

–––––––––––––––––––––––

––––––––––––––––––––––––––––––

The net cost of the computer is £2,250 (£3,200 - £950).

The full net cost is allowed by 31 March 2012 if the short life asset election is made.

If the election is not made, only £1,372 will have been allowed by 31 March 2012 and

£1,548 by 31 March 2013. The remaining £702 of net cost will be relieved, but over

several years on a 20% reducing balance method.

The election therefore accelerates the capital allowances claim.

Note that had the AIA been available to cover the full cost of the asset, a short life

asset election would not have been beneficial as it would have given rise to a

balancing charge of £950 on the disposal of the asset. In that situation, it would be

better to leave the asset in the main pool.

Chapter 6: Capital allowances – plant and machinery

Capital allowances for unincorporated businesses

 The treatment of private use assets

 Short periods of account

 Long periods of account

8 Capital allowances for unincorporated businesses

8.1 The treatment of private use assets

Full capital allowances are available to a company, even if there is an element of

private use of an asset by a director or employee. The benefit of private use will be

assessed on the individual as a benefit of employment; but it is irrelevant for

calculating the capital allowances available to the company.

However, as regards an unincorporated business, where any business asset is used

partly for business use and partly for private use by the owner, a separate record of

that asset must be kept. This is because capital allowances are only available on the

business proportion of the expenditure.

The most common example of a private use asset is a car used by the owner of the

business.

(You should refer to the Proforma capital allowances computation when reading the

following rules.)

(1) WDA on private use assets. The WDA on private use assets is calculated in

the normal way on a reducing balance method (or restricted to a maximum of

£3,000 if an expensive car). The WDA is deducted from the tax written down

value in the appropriate private use asset column in the proforma. However,

only the business proportion of this WDA can be claimed as a tax deduction

and entered in the total allowances column in the proforma.

(2) Disposal of private use assets. On the disposal of a private use asset, a

balancing adjustment is calculated in the normal way. However, in the case of

assets with a private use element, only the business proportion of the BA or

BC is entered in the total allowances column in the proforma.

(3) Annual investment allowance (AIA) and First year allowance (FYA) on

private use assets. If a private use asset is purchased in the accounting period

and the AIA (and/or a FYA) is available, the AIA (and/or FYA) is calculated

in the normal way and deducted from the cost in the appropriate private use

asset column in the proforma. However, only the business proportion of the

AIA (and/or FYA) calculated can actually be claimed and entered in the total

allowances column.

These rules only apply to assets with an element of private use by the owner.

Private use by an employee of the business is irrelevant. The assets are treated as

normal additions and disposals and allowances are available in full.

Paper F6 (UK): Taxation FA2009



Example

Francis is a self-employed electrician. He prepares his accounts to 31 March each

year. On 1 November 2009 he bought a Nissan car for £11,500 and sold it for £8,000

on 30 January 2011. The Nissan has CO

emissions of 140 g/km. His private mileage

in the car is 5,000 out of his annual total of 25,000. The TWDV b/f on the main pool

on 1 April 2009 was £16,500.

Required

Calculate the capital allowances available for the years ended 31 March 2010 and 31

March 2011.



Answer

The private use of the car is 20% (= 5,000/25,000). The business use is therefore 80%.

Francis–Capitalallowances,year

ended31March2010

Main

pool

Nissancar

(80%businessuse)

Total

allowances

£ £

TWDVb/f 16,500

AcquisitionsnotqualifyingforAIA

11,500

WDA(20%) (3,300)

3,300

‐Business%claimonly

(2,300) (=80%) 1,840



–

–––––

–

–––––––––––––––––––––––

–

–––––

–

–––––––––––––––––––––––

TWDVc/f 13,200 9,200



–

–––––

–

–––––––––––––––––––––––

–

–––––

–

–––––––––––––––––––––––

––––––––––––––––––––––––––––––

Totalallowances

5,140



––––––––––––––––––––––––––––––



Francis‐Capitalallowances,year

ended31March2011

£ £

TWDVc/f 13,200 9,200

Disposals (Nil) (8,000)



–

–––––

–

–––––––––––––––––––––––

–

–––––

–

–––––––––––––––––––––––

13,200 1,200

Balancingallowance

(1,200) (80%) 960

 

–

–––––

–

–––––––––––––––––––––––



WDA(20%)

(2,640)

2,640



–

–––––

–

–––––––––––––––––––––––

TWDVc/f 10,560



–

–––––

–

–––––––––––––––––––––––

––––––––––––––––––––––––––––––

Totalallowances

3,600



––––––––––––––––––––––––––––––

8.2 Short periods of account

When there is a short period of account, the tax rules for capital allowances are the

same as for companies (as explained above).