Hello. This is the part from Kaplan Ethel question:
Ethel Brown started to run a small bed and breakfast business as a sole trader on 6 April
2018. She prepared her first accounts for the year to 5 April 2019.
On 1 June 2018 Ethel paid a car dealer £14,000 by cheque for a car with CO2
emissions of 105g/km. She also made payments totalling £3,000 related to the
running costs of the car for the year. She has used the car 40% of the time for private
purposes and she drove 11,000 business miles during the year.
This is how Kaplan calculates capital allowance:
14000*18%*60%=1512.
My question is:
Should not capital allowance be time apportioned in which case final answer would be 1512*10/12=1260?
Thanks in advance.
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Kaplan question - Ethel - capital allowance
Hi Archi604
Capital allowance would be time apportioned if the account period is less than 12 months. The period of account here is 12 months (6 April 2018 - 5 April 2019). As such Kaplan's calculation is okay.
N/B It does not matter what time in the year the asset (car) was bought, so long as the account period is a complete 12 month period you allow the full business use.
Also note that FYA is never time apportioned. But the car in question qualifies for WDA at 18% (main pool) not FYA given it's CO2 emissions
Hi Archi
As you may guess - and "nonyei" has endeavoured to explain - the Kaplan answer is correct. WDA and AIA are only time apportioned when the accounting period itself is NOT 12 months, the date within the accounting period that the asset is actually purchased is irrelevant in determining the amount of WDA or AIA - note of course that FYA is NEVER time apportioned whatever the length of the accounting period.
When as here the WDA has been computed, the amount claimed is then restricted to the business use proportion.
"nonyei" it is most kind that you are taking your time to help a fellow student but it would be best on this specific forum that you leave the answering of the question to me - thank you
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