# Iba

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Registered Posts: 147 Dedicated contributor 🦉
I am still undecided as to how to deal with second hand IBA
This is from HMRC's website

Example Jackson builds a building in 2004 at a cost of £2 million excluding the land and brings it into use on 1 January 2005. The use is qualifying use. The annual WDA is £80,000. Jackson sells it to Green on 31 December 2009 for £1.5 million. The residue of qualifying expenditure after sale is £1.5 million. The period of 25 years beginning with the date on which the building was first used ends on 31 December 2029. There are 20 years of that period left when the building is sold. The WDA for a chargeable period of 12 months is therefore £1.5 million x 1 year / 20 years = £75,000

Therefore surely the method is: take the residue of qualifying expenditure (ie orginal cost less any WDA already used up) and divide by number of years/months to give the allowance for the new owner per year (pro-rated if period < or > 12 months)

So relieved - I did the 2007 paper yesterday for the first time and thought I was going mad when I looked at the model answers which uses the original cost rather than residual value.

• Registered Posts: 231 Dedicated contributor 🦉
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2007 uses differant rules, don't worry about it! The rules changed on March 21 2007. Effectively your IBA will be 4% whether second hand or new.

i.e.

100,000*0.04 = 4000

(100,000-8000)/23 (If been in use for 2 years) = 4000

Hope that helps,

Chris
• Registered Posts: 147 Dedicated contributor 🦉
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Hi Chris
sorry not with you. do you mean take residual value and divide by number of qualifying yrs/mths left?
• Registered Posts: 231 Dedicated contributor 🦉
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Hi,

Well my text book tells me to just multiply by 4%. The BPP tells you to take the residue value and divide by remaining years - Either way you end up with the same answer though.

I think the AAT will expect the BPP workings though.

Chris