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When dealing with the unincorporated trader in income tax we prepare a capital allowances (CA) computation for the trader’s period of account – we do not prepare CA computations for tax years!! If the period of account is for other than 12 months then both the AIA and the WDA must be time apportioned – hence the AIA for a 9 month period of account will be 9/12 x 100,000 and for a 15 month period of account will be 15/12 x 100,000. Remember we never time apportion the FYA. The CA’s when computed are deducted from the adjusted trading profit figure for that period of account. The Trading Income now computed will then be assessed for the relevant tax year of assessment using the appropriate basis of assessment. Hope this helps.
@mirush,wht is the answer cn we or not?
@sweetusudu, yes u can
can we prorate the AIA if the trading income is for more than 12 months, e.g. 15/12 x £100,000 of the AIA? please let me know with an example. You did mentioned it but i am not sure i fully understand it. Thank you for your generosity of these amazing lectures.
Hi, on page 46 of the lecture notes, paragraph 3.1 states that WDA & AIA can be apportioned up or down if the accounting period is longer of shorter than 12 months.
So yes; you can.
@mirush, Full WDA’s & AIA’s are for whole 12 month durations, so yes, you can do that and, according to accounting period lengths relative to the std 12 months, get proportionate shares of the allowances (so if your AP = 12 months, fine, u get full. Reverse true). Meanwhile you don’t worry about the period lengths yet, since the apportionment to tax years (for final IT computation) will later be taken care of by basis periods theory.
@crye, Otherwise 15/24 x 200,000 AIA