First Year Allowances

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
hi there, im doing my friends tax return year 04/05. he started his business in may 2004. my query is that he purchased some plant and machinery within the accounting year so they will have capital allowances of 50% using FYA's but some of his tools where purchased upto 3 years before he started up. i know he can bring them into his capital allowance computation, but would they be allowable with first year allowances aswell or do i just use the writing down allowance on those items of 25%?

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    First Year Allowances

    See CAA 2001 s 12 and CAA1990 s 83(2) Expenditure incurred fot the purposes of, and prior to commencenment of a qualuifying activity, is treated as incurred on the first day on which the activity is carried on.<BR><BR>The answer is FYA's are available on previously owned equipment, the rate is dictated by the commencement date.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    First Year Allowances

    Hi there ...You Say your friend started in business may 2004 and therefore will not have completed a full year untill at least 30th April 2005. On this basis i think that the first return for this business will be the 05/06 tax return (when a full years accounting figures are available) as this is how i have done my returns since 1992. i suggest you check this out before going any further.<BR><BR>Roy<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    First Year Allowances

    You will need to do a tax return for this last financial year 04/05. His basis period will be 05/04 - 04/05, and this is the period that he will be assessed on, together with whatever (if anything) he did from 06/04/04 to commencement of business.<BR><BR>Claudia<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    First Year Allowances

    I suggest you revise basis periods.<BR>The first assessable period is always from commencement to the following 5th April. This could be as short as 1 day, if you wanted to be pedantic!<BR>For the second and subsequent periods you need to apply the relatively straightforward rules for identifying them.

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