Ask the Tutor ACCA TX-UK
Accordin to opentuition study text;
under property income and investments (individuals)
improvements are capital and therefore disallowed-is it disallowed under both accrual and cash basis?
Under tax adjusted trading profit
improvement to an asset that qualifies as plant and machinery for capital allowance purposes is allowable under the CASH BASIS but is generally not allowable under the ACCRUALS BASIS.
Could you clarify both of them?I am confused to get it.
34m ago#1It depends what the improvement is to.
CAPITAL improvements to buildings are disallowed under both the accruals and the cash basis (property income and trading income). Examples would be extensions, loft conversions etc (something that increases the value of the asset which is not simply maintenance expenditure (eg redecoration/repairs)).
A CAPITAL improvement to an asset that qualifies as plant and machinery (for example, the addition of a part to a machine that improves its efficiency/life) would be allowable under the cash basis (as expenditure on P&M is an allowable expense under the cash basis (with the exception of cars)), but would be disallowed on the accruals basis as the item itself (and the capital improvement) would qualify for capital allowances instead.
