Accelerated Capital Allowances

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

There are the disclosures that should also be considered. These could feature in an exam situation so be aware of these also.

PGM wrote: »

I don't think he meant you.

He totally didn't.

Dean wrote: »

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

Regards

Dean