Secondhand IBAS, Answer of Exam papers of Dec 05, BTC. Confused!

sunny Registered Posts: 43 Regular contributor ⭐
Hi, I am confused with the answer for task 1.7 of DEC 05, BTC.
Could anybody tell me which compute method is right? THANK YOU!

Regarding the compute of secondhand industry building, the modle answer is:
If you purchase the used building, the amount on which the allowance is based is the lower of either the original purchase price paid by the owner of the building, or the price you paid. Therefore, in your case, you would only get allowances based on the £40,000. However, the allowance is based on the remaining tax life of the building. As the building is 9 years old,
you would get the remaining 16 years. This would give you an annual written down allowance of £40,000 / 16 = £2,500.

The method is totally different with I have learnt from BPP textbook, and the result will be different. I check the rules on HMRC, information listed as below:
Recalculated WDAs
Currently, the new owner on a purchase within 25 years of first use of an industrial building is entitled to a recalculated WDA. Comparable rules apply in the case of an agricultural building, but only if there is an election (see above, at paragraph 6). The recalculated WDA is based on the RQE after the sale, divided by the length of time between the date of sale and the end of the period of 25 years.

So, what is the right method?


  • popcornlpw
    popcornlpw Registered Posts: 30 Regular contributor ⭐
    that is the old rules. we are not use it any more.Please following the new one which is:

    Org cost
    less IBA already claimed (Org cost x 4% x No Year or Months)
    Revised cost / No Years or months left = Current IBA

    Good luck
  • sunny
    sunny Registered Posts: 43 Regular contributor ⭐
    Thank you very much!
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