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Hello,
I have been going through your lectures and so far it’s been amazing. The concepts are really clear to understand.
In Chapter 5, on a cash basis, plant and machinery are deducted as an allowable expense against adjusted trading profits.
So I just wanted to confirm that the section in Chapter 5, Sale of plant and machinery only talks about on accruals basis and not cash basis.
If it was on cash basis, then nothing have to be done with regards to disposal as part of Capital Allowances calculation concerning plant and machinery. Am I going in the right direction?Thank you.
In Chapter 4, on page 42 section 2 part 2 it states:
‘Cash received and cash paid includes not only cash received from customers/paid to suppliers, but also cash received/paid on the sale/purchase of capital assets that would normally qualify as plant and machinery for capital allowances purposes….with the exception of cars.’
In Chapter 5, on page 51 section 1 it states:
‘Under the CASH BASIS, most plant and machinery will not get capital allowances as the cost of the asset will be an allowable expense when incurred, and when sold, the proceeds of sale are taxed as a trading receipt. The only exception to this is where the asset is a car, where either capital allowances (and running costs) can be claimed as trading expenses, or the fixed rate mileage allowance.’
I hope this clears things up for you.
Thank you for replying.
It is pretty much clear now.
Under Cash basis, if plant and machinery are sold then the receipt would be included as a trading receipt and will not be included in the Capital Allowances. Under Capital Allowances, only cars will be included .Under accruals basis, both cars and plant and machinery would be included.
Thank you so much for helping and also very grateful for all the tax lectures and notes. We can understand that it was a huge job in getting the videos and notes uploaded.
So thank you once again for it.
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