BTAX: Capital allowances

MarieNoelle

Hi all,
I was wondering if someone could help.
When doing capital allowances computations, which of proceeds or original cost is deducted from the main pool when there is a disposal in the CAP of Plant & Machinery?

My Osborne book always has examples where the proceeds are deducted but the answers for practice assessment CBA 2011 on the aat website (Question 1.7) deducts the original cost.
I have a BTAX exam on Monday and thought I had understood capital allowances computations...until now!

Thanks in advance for your help,
MarieNoelle

Jo Clark

Hello MarieNoelle

I have only just started this module however I thought I would have a look at your query.

According to my text book the most common disposal value at which assets are entered into a capital allowances computation is sale proceeds. However, there is an overriding rule that the capital allowances disposal value cannot exceed the original purchase price of the asset.

I have not looked at the practice assessment but hope the above could be the answer.

Hope this helps?


JC

MarieNoelle

Thank you Jo,
I have just had a look on the Business Link website and this is what is said too.
The question indeed states : Disposals of Plant 12,400 (original cost 11,000).
It's a lot clearer now! Why do they always have tricky questions?????
:001_smile:

Jo Clark

MarieNoelle wrote: »

Thank you Jo,
I have just had a look on the Business Link website and this is what is said too.
The question indeed states : Disposals of Plant 12,400 (original cost 11,000).
It's a lot clearer now! Why do they always have tricky questions?????
:001_smile:

To ensure we know the theory and can apply it