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June 21, 2017 at 6:23 am
Could you please tell me the right treatment of the following example.
There is a special pool, in which there is only one car. The car is with high CO2 emissions. The original cost of the car is 5000 and it has been in the pool for 2 years. On the third year it has been sold.
First year 5000* 8% =400
Second year 4600*8%= 368
Third year disposal amount of 2000
How I should treat the rest of the amount 4323-2000=2323. Can I claim it all for this year.
August 29, 2017 at 11:16 pm
Assuming that the car emission > 130g/km => Special Rate band for WDA.
First year: 5000*8% = 400, remaining 4600 c/f
Second year: 4600*8%=368, remaining 4232 c/f
Third year: disposed @ 2000 which is less than the original cost of 5000.
SR will be 4232 – 2000 = 2232 which to more than small pool WDA claim threshold (1000), therefore, can’t be claimed in full, but @ 8% and the remaining WDA – SR c/f.
This is all assumed that there is no further other capital allowance.
May 21, 2017 at 9:10 am
Could you make me clear, why in Example 1 instead of deducting disposals amount of 3000, which is the original cost, you deducted sales proceeding of 500?
May 25, 2017 at 4:32 am
You should always deduct the proceeds not original cost.
The sentence …. up to original cost of asset is deducted from the balance of unrelieved expenditure of the relevant pool means. If you had bought it for 10,000 and you sold it for 12,000 so here there proceed is 12,000 but you can deduct only up to 10,000 and you cannot go above it.
August 29, 2017 at 11:23 pm
If sale price > original cost => deduct original cost.
If sale price deduct sale price.
In this way, HMRC could close the capital allowance loophole, where ‘arrangements’ are made in order to achieve the remaining residual falling into the Small Pool WDA threshold.
May 11, 2017 at 5:37 am
Thanks for the great lecture. However I am confused about the treatment of the long life asset.
when the expenditure is higher than 100,000 it goes to special pool.
In the illustration 3, the cost is 230,000 and it is treated as AIA of 200,000 and the rest in special pool.
Please re-explain the rule.
May 25, 2017 at 4:36 am
Yes it goes to Special rate pool and not main pool but it does not mean that it cannot qualify for AIA. I mean it does qualify for AIA but after AIA you should not take it to main pool but instead to special rate pool.
August 29, 2017 at 11:31 pm
The allocation method of AIA is that:
1) Categorise the relevant AIAs into SR pool and others.
2) Dealing with AIAs relating to SR pool FIRST, if exceeded 200k, distribute extras to SR pool.
3) Dealing with AIAs others SECOND, if 2) over 200k, automatically distribute everything into Main pool. If 2) over 200k, fill in the gaps.
So for long life asset, you know it’s SR, deal it first. as it’s 230k, over 200k, the remaining 30k goes to SR pool.
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