PRACTICE QUESTION !! 11 !! CARL!

Bbanglardamal10y ago

a/c y/e 5th April 2015: Relating to disposal: sold two lorries for 2500 each which were purchased for 8450 each...SO, as far as my understanding, sold for 5000 against cost of 8450* 2= 16900. therefore balancing allowance should occur of (16900-5000) ie, 11900 ?? a/c y/e 5th April 2016 : relating to purchase of motor car co2 of 120g/km, why is the main pool addition not claiming for AIA , we used only 120,000......cant we claim AIA for motor car may be??And, again in the disposal cant we claim balancing allowance of (15250 cost-sp12000) ie 3250??? Bit confused there! Please shed me some light onto that !!!

TTTax Tutor10y ago#1

You really need to work through chapter 5 on capital allowances preferably with the lecture and then you would not be asking these questions. Lorries when purchased would be main pool expenditure and you do not get a balancing allowance when pool assets are sold - that is the entire point of a pool! Plus you would not calculate a balancing adjustment that way. On cars the most basic rule is - NO AIA. It is no good trying to work practice questions if you have not firstly studied the notes and worked the examples, preferably accompanied by the lectures.

Bbanglardamal10y ago#2

Thanks for your effort....Now I know.....but still confused with the balancing adjustment.....Do we get it only in cessation? when the entire pool has been sold? Thanks again!!!

TTTax Tutor10y ago#3

A balancing adjustment will always arise on the CA pools on cessation of trading and may be either a balancing allowance or a balancing charge. While the business continues to trade you will have a balancing adjustment arising on the sale of a NON pool asset, usually an asset with private use by the proprietor. A balancing allowance will NEVER arise on the CA pools but a balancing charge would arise on a pool if the disposal consideration of pool assets during the period was bigger than the tax WDV on the pool. A negative balance cannot be c/f on the pool so it is reduced to nil by the creation of a balancing charge.