AIA

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.