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Hi
Can you assist me with understanding what the years denote in terms of timing. For example, capital investment incurred now is denoted as year ‘0’ and capital allowances on it is claimed for year 1 except in FYA. Similarly if an investment is done at year 1 does it mean investment is done at the start of year 1 or at the end of year 1 and will we claim allowances for year 1 ?Is there any difference in treatment when it is tax allowable depreciation in contrast to capital allowances ?
Have you watched the free lectures, because I spend time explaining this.
Time 0 is a point in time – now.
Time 1 is 1 year from now (either the end of the first year or start of the second year – they are effectively the same day).
Time 2 is 2 years from now. and so on.
An investment is never ‘done in year 1’. Unless told differently we assume it is on the first day of the first year which is time 0.
Capital allowances are calculated at the end of the first year (time 1). When the cash effect takes place depends on whether the tax effect is immediate or one year in arrears.
Tax allowable depreciation and capital allowances means the same thing.
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