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While going through a question, I came across the disposal of Special rate pool Car that was recently purchased but disposed of within 2 months.
Purchased for 57000 and disposed of for 50000.
With remaining balance of 7000 in SRP. I thought this was a balancing allowance. But it seemed like they calculated 6% WDA on it. I got confused.
I need your help regarding when do we calculate balancing allowance and when do we calculate WDA on disposal?Thank you.
Main pool and special rate pool:
As long as there’s a positive balance after any disposals and the business is continuing to trade, then no balancing allowance is given; the positive balance continues to be written down as normal (even if there are no physical assets remaining).
If there’s a negative balance after any disposals then a balancing charge arises.
A balancing allowance is only ever given on the main pool and the special rate pool in the period that the business has ceased to trade.
Okay so that’s the reason.
I thought this rule applied not just to the business when it ceases to trade but also the assets as well because we stop using the assets.
But I was wrong.Thank you for clearing my doubts.
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