I have a exam practice question whereby building costs (of an extension) are put as a ‘0’ under the AIA (which is being used for special rate costs first). The building cost ($61,000) does not show up anywhere else on the calculation (presumably it is not an allowance so cannot be deducted from trading profit). But why does it not show up in the special rate pool to be taxed at 8%? I find this confusing. The $61000 is not deducted from the AIA total either.
a note about the extension in the answer states: “the expenditure which is integral to the building is special rate pool expenditure”. this does not help clarify the 0 value.
further, are only new buildings put in the main pool?
if you could help clear up my confusion I would be thankful.
Capital allowances are available for plant and machinery NOT buildings, but integral features within buildings qualify as plant and machinery and are allocated to the special rate pool if not fully covered by AIA
Don’t make the mistake of thinking that all capital expenditure qualifies for CA – it is only qualifying plant and machinery that qualifies for CA
Yes I see. That was exactly the mistake I was making. Thank you!
You must be logged in to reply to this topic.