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Julian is a sole trader who prepares accounts to 5 april each year. He acquired a car for both business and private purposes on 1 october 2017. The car has a Co2 emission rate of 165 g/km and cost £ 21000. The private mileage for Julian’s period of accounts to 5 April 2018 was 25 % of the total mileage for that year.
What is the maximum amount of capital allowances that julian can claim in respect of the car for the year ended 5 April 2018?i understood that its 8%* 21000* 75% business use = 1260. But please sir clarify why isnt it prorated? as it is purchased on 1 0ctober 2017 ?
Sorry for stepping in like this,m not the tutor, but what I understand is that the WDA is an annual allowance, and since we prepared the accounts for the whole year, there is no apportionment. When the car was bought in the year is not an issue, as long as the period is 12 months , we wont change the portions ( from what I ve learned)
Azam is correct – we prepare a capital allowance computation for the accounting period and the date within that period that an asset is purchased is irrelevant as to the amount of AA, WDA or FYA that may be claimed. The only issue is the length of the accounting period itself!
The usual situation when you see an accounting period of other than 12 months is on either the commencement of a trade or the cessation of a trade.
In the final accounting period there is only a balancing adjstment to be computed – no AA, WDA, nor FYA, thus the most likely situation for you to have to time apportion either a WDA as here or otherwise the AA is for the opening period of account when it is unlikely to be a 12 month period.
Have you worked through the OT lectures?
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