capital allowances

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wolfe
wolfe Registered Posts: 121 Dedicated contributor 🦉
hi everyone. was doing a couple of questions relating to capital allowances. got stuck.went online .googled it. but i still have some questions. if the question says that capital allowances are to be claimed as much as possible and as early as possible,wat does it mean?? does it mean that i have to use the AIA for the special rate pool and short life assets and then the other items which qualify??
and whats the use of depooling assets. i read that it accelerates allowances.... but what does that mean?how does it accelerate allowances?
and all the question ive solved the short life assets are sold resulting in balancing allowance or charge. but wat abt the wda's?? is wda not applicable on short life assets

any help would be greatly appreciated. im really confused. thanks in advance

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  • Bluewednesday
    Bluewednesday Registered Posts: 1,624 Beyond epic contributor 🧙‍♂️
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    wolfe wrote: »
    hi everyone. was doing a couple of questions relating to capital allowances. got stuck.went online .googled it. but i still have some questions. if the question says that capital allowances are to be claimed as much as possible and as early as possible,wat does it mean??

    This is because you can disclaim your capital allowances for whatever reason (for tax reasons) or not claim the full allowance, the question is just telling you not to do that.
    wolfe wrote: »
    does it mean that i have to use the AIA for the special rate pool and short lifeassets and then the other items which qualify??

    AIA is available against all those items and is better used against them first as they tend to have a lower rate of relief than the main pool (10% wda as opposed to 20%)
    wolfe wrote: »
    and whats the use of depooling assets. i read that it accelerates allowances.... but what does that mean?how does it accelerate allowances?

    An asset in it's own pool is subject to a balancing allowance or charge on disposal so you will get the full allowances on that asset rather than it just mingling with the rest of the pool which will just be written off eventually rather than when it is sold.
    wolfe wrote: »
    and all the question ive solved the short life assets are sold resulting in balancing allowance or charge. but wat abt the wda's?? is wda not applicable on short life assets

    any help would be greatly appreciated. im really confused. thanks in advance

    SLA's do have wda's on them, at the normal rate.

    However now you have to look at the value of depooling as unless the business is quite big, the AIA may cover it all anyway!

    I hope that helps, please ask more if I have not explained things very well.
  • wolfe
    wolfe Registered Posts: 121 Dedicated contributor 🦉
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    hi Bluewednesday . thank you so so much. this information has really been helpful. got a few more questions
    .
    1) is there some kind of sequence in which to claim AIA? like SRP(SPECIAL RATE POOL) first , then SLA?

    2)in one of the question the TWDV B/F for SLA is 13,440 ,its disposed proceeds are 5,520. so theres a balancing allowance of 7,920 . my question is why the WDA isnt claimed?? is it because its the year of disposal? this part confuses me because all the questions ive done the SLA is sold. theres no question in which SLA isnt sold .

    thanks in advance
  • wolfe
    wolfe Registered Posts: 121 Dedicated contributor 🦉
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    hi again. forgot to ask one thing. in one of the solved questions in the textbook lifts(20,000) and lighting(40,000) which are SRP items have claimed AIA
  • wolfe
    wolfe Registered Posts: 121 Dedicated contributor 🦉
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    HI . so sorry .i by mistake pressed post reply. i was saying :

    in one of the solved questions in the textbook lifts(20,000) and lighting(40,000) which are SRP items have claimed AIA , the remaining 10,000 has been transferred to the SRP ! van and plant which are also eligible for AIA were put under non qualifying assets in the general pool .

    now i dont understand this logic . if it were me i would have either put all items as qualifying for aia . or only the van and plant, the light and lifts i would have kept in the SRP.

    what am i missing? it says in the answer that its the most tax efficient way!
  • Bluewednesday
    Bluewednesday Registered Posts: 1,624 Beyond epic contributor 🧙‍♂️
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    well you are only going to get allowances in future years at 10% on the special rate pool whereas allowances in the general pool will be 20% so you are best to use AIA on special rate stuff first.

    IF you're not sure work out the question with AIA used on SRP first and then with AIA used on P&M and you'll see the difference.

    WDA are not claimed in year of disposal, it would come to the same anyway!
  • wolfe
    wolfe Registered Posts: 121 Dedicated contributor 🦉
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    hi. thanks alot. you have been a great help. just one last question. wda on sla is always 20% right? thanks for all your help.
  • Bluewednesday
    Bluewednesday Registered Posts: 1,624 Beyond epic contributor 🧙‍♂️
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    I've had to look this one up as I wasn't sure but it appears that anything that relates to the special rate pool cannot be elected to be a sla so 20% would be the correct wda
  • wolfe
    wolfe Registered Posts: 121 Dedicated contributor 🦉
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    thank you bluewednesday . thankyou so much. i have started to get this thing.
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