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Capital Allowance Computation!
Unincorporated v Incorporated
Is it correct that for a period greater than 12 months (say 16), one prepares a Capital Allowance Computation (CAC) based on the longer period for an UNINCORPORATED business, while subsequently for an INCORPORATED business two CAC’s must be prepared (12 and 4 mts respectively)? So WDA and AIA is never scaled up proportionately for an INCORPORATED business!?
Thanks in advance 🙂
Unincorporated busines you need to upscale (i.e. increase the capital allowance for 16 month), so you dont divide WDA or AIA into two parts.
However for Incorporated business WDA & AIA is broken into two parts i.e. 12 months + 6 months and two calculation are done for each Chargeable accounting period (CAP).
Hope it helps
RajMy understanding is that the workings for capital allowances are the same for either incorporated or unincorporated businesses.
Firstly you need to work out the profit for the whole period, for whatever length of period. You subtract the capital allowance to arrive at the net profit, after the capital allowances have been scaled up or down according to the length of the period.
Once you have calculated this profit figure, you may then need to pro rate it in the case of a company. If it is a 15 month period for example, multiply by 12/15 for the first period, and multiply by 3/15 for the second period.
your explanation for unicorporated business is correct.
However for corporated business you need to prepare two capital allowance calcuation. other your answer wont be correct. I.e. you cant do 12/15 or 3/15.
Hope it helps
Regards
RajHi Raj,
You’re absolutely right, I must have learnt that one wrong. I can’t remember what I did in question 2 of the June exam, but luckily I passed anyway!
Quiet happy to hear good news, even I completed my F6 paper this attempt.
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