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AIA

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › AIA

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by Tax Tutor.
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  • June 21, 2020 at 8:22 am #574382
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    sir i had a small doubt. could you just tell me why an (un)incorporated business might not want to claim AIA? because apparently HMRC gives this option to businesses

    June 21, 2020 at 11:47 am #574407
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    Apologies if I did not discuss this in the lectures but the most likely situation for a restricted capital allowance claim to be made is for an unincorporated trader rather than incorporated – the usual situation would be to avoid wasting a PA but could also be to limit a trading loss to achieve an optimal loss relief claim – this could again be to ensure no wastage of the PA
    An example of avoiding wasting a PA would be – a trader had an adjusted trading profit of £30,000 before deduction of capital allowances and had no other taxable income for the tax year. The trader bought an item of plant and machinery in the period at a cost of £25,000 and had no tax wdv b/f on any pools.
    If the trader claimed all CA then the trading profit would be £5,000 and with a PA of £12,500 this would waste £7,500 of PA. Therefore restrict the CA claim to £17,500 (c/f the balance of £7,500 in the main pool) to give a trading income assessment equal to the PA.
    The restriction of the CA claim applies not just to AIA but also to WDA and FYA.

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