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The example 16 of the capital allowances section finance act 2020 has a motor car which goes into the special rate pool and which is then disposed of. The net cost that comes after subtracting the sale proceeds from the purchase cost is positive but no balancing allowance has been made whereas in the notes it is mentioned that a balancing charge can arise on disposal. In examples 4 and 5 of capital allowances chapter in the notes balancing adjustments have been shown when disposal occurs. But this is not the case in example 16 where a wda of 6% has been applied. Why is it so? If sales proceeds exceeded the purchase cost and a balancing charge had arisen then would still a wda of 6% would be applied instead of a balancing charge? Why would it be so.
Also what does the statement: even though it is the only asset in the special rate pool, there is no balancing allowance on the disposal of this motor car because the expenditure is included in a pool. meanThe example 16 of the capital allowances section finance act 2020 has a motor car which goes into the special rate pool and which is then disposed of. The net cost that comes after subtracting the sale proceeds from the purchase cost is positive but no balancing allowance has been made whereas in the notes it is mentioned that a balancing charge can arise on disposal. In examples 4 and 5 of capital allowances chapter in the notes balancing adjustments have been shown when disposal occurs. But this is not the case in example 16 where a wda of 6% has been applied. Why is it so? If sales proceeds exceeded the purchase cost and a balancing charge had arisen then would still a wda of 6% would be applied instead of a balancing charge? Why would it be so.
Also what does the statement: even though it is the only asset in the special rate pool, there is no balancing allowance on the disposal of this motor car because the expenditure is included in a pool. meanChapter 5 notes and lectures clearly identify that balancing allowances on a pool may only arise on the cessation of trading (this also answers your final point – there is no balancing allowance on a pool just because all the assets that have gone into that pool have now been sold – WDA will continue to apply in future periods and a balancing allowance may only arise on cessation of trading).
A balancing charge will only arise on a pool when the sale proceeds of pool assets in the period exceed the tax wdv of that pool.
Balancing adjustments will always arise when a non pool asset is sold.
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