BTC - IBA

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:25AM in AAT student discussion
Hi Guys,

Can anyone please help me out on this. It fails to click. I can understand the 4% over 25 years for the 1st owner. But am utterly confused about the second buyer. How does the IBA gets calculated for the 2nd buyer?

Many thanks

Stella

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:BTC - IBA

    IBA are as you say calculated @ 4% of cost over 25 years, therefore:-

    New building qualifying IBA costs the first owner(A)£50,000 bought 1996 (forgetting months for ease).

    A then sells the building in 2001 to the second owner(B) for £100,000

    A's Capital Allowance claims
    Cost £50,000 x 4% = £2,000
    IB held for 5 years, total claim = £10,000
    NBV of the building = £40,000

    (there is a balancing charge issue he for A that will be including with A's PCTCT).

    B has paid 100,000 for the building but will only be allowed to claim IBA on the £40,000 therefore now only collecting 20 years IBA.

    B's Captial Allowance Claims
    Cost £40,000 (starting point for second owners IBA)

    I hope this has help and if you want help on the capital gains issues i'll try and help you there too.

    Regards

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:BTC - IBA

    Thanks Dean,

    Sorry for being thick, but does it mean the 2nd owner will be claiming IBA @ £2000 for 20 years. Just confused with the IBA for 2nd user.

    Kind regards

    Stella
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:BTC - IBA

    Yep that's correct.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:BTC - IBA

    Thanks Dean

    Kind regards

    Stella
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:BTC - IBA

    Would B not claim IBA's on the lower of original cost and purchase price - in this case £50,000?

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:BTC - IBA

    Hi Scott

    Yes thats quite correct. It should of actually been £50,000. I think im right in say that the IBA would be slighty more:

    £50,000
    20

    =

    £2,500 capital allowance per year to the remaining 20 years.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:BTC - IBA

    Hi Dean.

    I'm glad you agreed because that's how i did it in my ACCA business tax exam this morning!!

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:BTC - IBA

    Well done and thanks for pointing it out.

    Did you do business tax at ATT? If so how much more difficult was the ACCA in comparison?

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:BTC - IBA

    Our college didn't offer business tax as an option so it was all new to me!

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:BTC - IBA

    Ah I see, Im sure you will be fine.

    Im sitting mine on Tuesday! :shock:

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:BTC - IBA

    Best of luck - i know you'll be fine.

    Scott.

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