Capital Allowance claiming AIA and WDA on same thing

pirate

Hi there

Am a bit confused and hope someone can help me

I always thought that if you had an item that you bought say for £60000 then it would be suject to 50,000 of AIA in the first year
The rest ie the 10000 is then given a FYA of 40% so 4000 is claimed

in total then for this year assuming nothing else we have capital allowances of 54000 and a WDV to C/F of 6000

In task 2 in the BPP book on page 237 you need to calculate 3 years of capital allowances for a company just starting to trade.
Its the first year I am interested in

so here is the question
Mrs Frinton commenced trading on the 1 Jan 2008 making accounts up to Aug 2008
and annually thereafter
In the first year she buys £40500 of plant

This is how I calculated it

the is no WDV c/f as she has just started to trade
her 50,000 AIA is redunced to £33333 due to her only trading for 8 months
so its 8/12 *50000
this means that she can only claim 33333 of the 40500 she spent on plant
This would mean that she carries 7167 through to the next accounting period
(there is no FYA allowance on the rest since she made the acquistion before 6 April 2009)

however the answer shows the the 7167 is then subjected to WDA of 20% *8/12 to give a WDA on the main pool of £956 in this year.

This mean that she has claimed both AIA and WDA of 20% allowance on the same assets

Is there a rule here that I am unaware of.

Can anyone shed any light on this

thanks in advance

mrspnut

You can claim WDA of 20% on the balance remaining after AIA has been claimed and it must be time apportioned but for purchases made between 01/04/09 and 31/03/10 40% FYA can be claimed on the balance instead of WDA.

You cannot claim FYA and WDA for the same items, it's one or the other after the AIA allowance.

jem88

I can see what you mean. I know there is an error in the question prior to that which I have emailed them about and received a corrected answer. There are also other errors in the book, so I would not be surprised if this was one too!!

Jemma

pirate

Hi everyone

found out the answer by going onto the HMRC web site
So before 6 Arpil 2009 there was no FYA @ 40%
in this case then a balance left after the AIA was taken off is transferred to the main pool BEFORE WDA is deducted. So this means before 6 April 2009 anything acquired over 50000 is entitled to the WD allowance in the period in which it was acquired.
After 6 April 2009 (for corporations 1 April 2009) you get the FYA of 40% so you add it into the pool after you have done the WDA for that year

Wow learnt something at this late stage
hope we dont get asked that

jem88

Excellent! That helps! Thanks!
Jemma

pirate

Hey Jemma

Just posted a thing about the question before
Is it that there is a spurious extra 1920 and also the total for Capital Allowances is wrong

I got 63500 for that answer

pirate

hi Mrspnut

thanks for your input, all makes sense now
bizarre its not in my Osbourne book at all
but its is explained inthe text for BPP

Karen