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Olive is self-employed, preparing her accounts to 5 April each year. She claims capital allowances
on a motor car used in her business. The motor car has a CO2 emission rate of 145 grams per
kilometre, with 40% of Olive’s mileage for private purposes.
The motor car had a tax written down value of £12,000 at 6 April 2018. Olive sold the motor car for
£6,000 on 1 November 2018.
What amount of capital allowances can Olive claim in respect of the motor car for the tax
1. The answer is A.
2. The examiner’s report states the following:
-As the car was disposed of during the year, candidates need to recognise that a balancing allowance arose on its disposal, and that the amount of capital allowance Olive could claim was restricted to the business use element (i.e. 60%). The correct answer was therefore A £3,600 ((12,000 – 6,000) x 60%).
3. My issue is that a balancing allowance arose only on cessation. So how come in this question, a balancing allowance is claimed.
Once again you are asking questions that if you had properly worked through the notes and lectures you should not be asking as this issue is clearly dealt with in the the OT material.
This is a NON POOL asset – a balancing adjustment, either a BA or a BC will always arise on its disposal.
Before you ask any more questions YOU must go back to the OT material for the answer before writing to me.