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Sir, I came across the following sentence in the study kit which sort of stymied me. Here it is:
“If FYA is partially claimed the balance cost goes into the main pool but is not entitled to any other allowance in that year.”
WHY would someone claim only partial allowance when they can claim full 100%? This becomes more puzzling when that individual cannot even claim any other allowance over that remaining cost(which was not set-off against FYA).
Apologies for delay – I had somehow missed this question.
I thought that I had discussed restricting the CA claim in the lectures but once again apologies if that is not the case.
A taxpayer may claim whatever amount of AIA, WDA or FYA that they choose – the reason an individual trader may do this would for example be to avoid wasting their PA – an individual had an adjusted trading profit BEFORE deducting CA of £20,000 and had no other income for the tax year. The maximum CA available for the accounting period is £15,000.
If the full CA claim was made the tax adjusted trading profit would be only £5,000 (20,000 – 15,000) and as this is less than the PA of £12,500 then £7,500 of the PA would be wasted – better therefore to restrict the CA claim to an amount that will reduce the taxpayer’s income to £12,500 and carry forward a higher tax wdv on the pool which will be eligible for CA in the future, whereas if a PA is unused it is wasted!
In respect of your other point about not claiming any other allowance on the FYA expenditure remember the order in which the CA are claimed – AIA, WDA, and only finally FYA. Think logically about your question as well – if you do not want all of the FYA why would you want to claim any other allowance on the expenditure!
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