Btc june 2008 task 2.5

Londina MAAT, AAT Licensed Accountant Posts: 814
BTC JUNE 2008 TASK 2.5:

Email from Director to Accountant:

I am hoping that you can give me some advice on a taxation issue.
As you know, we bought a building in December 2006 for £140,000. As the business is growing, I feel that we have already outgrown the building, and I am thinking of selling it to replace it with a bigger one.
I think we could sell the current building for about £180,000 and I have seen a new one which looks ideal for £230,000.
However, I am concerned that there could be a large tax bill if we sell our current building.
Any advice or information would be most welcome.

I thought it was a question about IBA instead it's about Rollover relief, ie. Capital gain!!!
How can I tell the difference? Iba it's a capital allowance on industrial building and I thought rollover relief is applied only when you re-invest the asset!!:001_unsure:


  • carla030698
    carla030698 Registered Posts: 112 🎆 🐘 🎆
    If they are enquiring about IBA its quite likely that they will be purchasing the Building/land in the tax year concerned rather than previous periods.

    Also it is unlikely that they will be replacing the building in the same year as they are upgrading it

    Good luck in the exam!!! x
  • hanapospis
    hanapospis Registered Posts: 111 🎆 🐘 🎆
    Hi Everyone,

    Can anyone please explain me IBA? I am studying from Osborn books for 2009 examination and there is nothing about it. They said it would not be examined in 2009 exams. But apparently everybody keeps saying it will..

    I went through a few examples in pass papers but do not really get it. I know it is just a percentage you need to multiply the cost of the Industrial building. But can anyone explain me what it is IBA and what the rules are?

    Thank you so much.
  • carla030698
    carla030698 Registered Posts: 112 🎆 🐘 🎆
    Industrial Buildings Allowance is an allowance that can be claimed on the cost of an industrial building.

    It cannot be claimed on the cost of land, however it can include any costs incurred in preparing the land to build on.
    Also any non industrial use of the building, ie offices cannot use more than 25% of the building if it does the percentage must be deducted from the cost before calculating IBA.

    For example a man buys an Industrial building from a builder the costs are:

    £150,000 land
    £20,000 Preparing the land
    £100,000 Building (Offices consist of 10%)

    There for the £20,000 and the £100,000 are allowable giving IBA as:

    £120,000 x 3% = £3600

    Hope this makes sense! :001_smile:
  • hanapospis
    hanapospis Registered Posts: 111 🎆 🐘 🎆
    Thank you. It makes sense.. Do not understand why they did not include this topic in Osborne books.

    Thanks again.
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