Accelerated Capital Allowances

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jewels.p
jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
Can one of you experts on here explain to me (in simple language) what exactly "Accelerated Capital Allowances" means and in what instance you would use it. I googled it but still dont quite get it.

Thanks a lot:001_smile:

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  • Steve Collings
    Steve Collings Registered Posts: 997 Epic contributor 🐘
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    Hi,

    The term 'Accelerated Capital Allowances' is usually referred to in financial reporting where deferred tax is concerned. Quite often HMRC will grant capital allowances (Annual Investment Allowances) on a qualifying item of fixed asset (e.g. a computer) which are higher than the rates of depreciation applied in the accounts to the same asset(s) - hence the capital allowances are thus 'accelerated'. In the capital allowances computation a company may claim 100% capital allowances against a new computer, hence the tax written down value of the computer will be zero (as it's all written off in the year of acquisition). The depreciation rate in the accounts for the same computer may be 3 years on a straight-line basis, so the computer will still have a book value in the accounts. The fact that HMRC have allowed a company to write off the whole amount of the computer in year 1 mean that 2 year's worth of capital allowances have essentially been accelerated. In theory this difference would therefore give rise to a deferred tax liability and is usually disclosed as follows in the accounts (under the deferred tax note):

    Opening deferred tax balance X
    Accelerated capital allowances X
    Closing deferred tax balance X

    Hope that helps

    steve
  • jewels.p
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    Thanks Steve:thumbup1:
  • beverly hudson
    beverly hudson Registered Posts: 95 Regular contributor ⭐
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    There are the disclosures that should also be considered. These could feature in an exam situation so be aware of these also.
  • Steve Collings
    Steve Collings Registered Posts: 997 Epic contributor 🐘
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    There are the disclosures that should also be considered. These could feature in an exam situation so be aware of these also.

    I'm not sure what you mean here. The OP merely wanted an explanation of accelerated capital allowances, therefore I feel that digressing into disclosure issues would take the OP's thread off topic.

    Also (though I may be wrong), but the question asked by the OP does not suggest it is exam related. It sounds like a real-life issue the OP is facing.
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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    images?q=tbn:ANd9GcS5KxNFsSs6H8f8KgKtKZ1OasTARq_tU9zg1Zky2_CUDI1dHoQ0
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    images?q=tbn:ANd9GcS5KxNFsSs6H8f8KgKtKZ1OasTARq_tU9zg1Zky2_CUDI1dHoQ0

    True, that.
  • jewels.p
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    Hey I am not a troll??????:huh:
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
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    jewels.p wrote: »
    Hey I am not a troll??????:huh:

    I don't think he meant you.
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    PGM wrote: »
    I don't think he meant you.
    He totally didn't.
  • Dean
    Dean Registered Posts: 646 Epic contributor 🐘
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    Monsoon wrote: »
    He totally didn't.

    Agreed. It was aimed at Bev. She's always had a 'thing' for Steve :001_wub:

    Regards

    Dean
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    Dean wrote: »
    Agreed. It was aimed at Bev. She's always had a 'thing' for Steve :001_wub:

    Regards

    Dean

    :lol::lol::lol:
  • jewels.p
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    Now you all mention it I do remember the name from before.

    Steve was right (as he always is). I was needing to know for a real life situation not an exam one and as always his answer was the one I needed.

    Thanks again Steve :thumbup1:
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