June 2023 to March 2024 exams Watch free ACCA TX lectures
5.3. Capital allowances The basic capital allowance rules for an unincorporated business, (see chapter 5) have previously
always applied to companies with the exception that there are NO private use assets and note only
one AIA is allowable to a group of companies.
For a two-year period from 1 April 2022 to 31 March 2024 however, companies (and not individuals)
can benefit from
enhanced capital allowances when they purchase
NEW plant and machinery:
๏
For expenditure that would fall into the
main pool and otherwise attract the AIA, there is a
130% (super deduction) FYA that is available. This means that for every £100,000 of
expenditure, a first year allowance of £130,000 is available. Cars do not qualify but as per the
rules in income tax for unincorporated traders, zero emission cars will attract the usual 100%
FYA.
๏
For expenditure which would fall into the
special rate pool , there is a
50% first year allowance .
The e
ff
ect of this is that special rate pool expenditure should firstly attract AIA as the 100% AIA is
better than the 50% FYA - if such expenditure exceeds the AIA limit (£1m for a 12 month accounting
period) then the excess will be eligible for the 50% FYA with the remaining 50% being allocated to
the special rate pool where the reduced rate of WDA (6%) will become available from the NEXT
accounting period onwards.
Second hand plant and machinery which is of course NOT eligible for the 130% FYA, will continue to
be eligible for AIA.
Note: Disposals of assets that attracted these enhanced capital allowances have special rules that apply but these will not be examined in the TX-UK examinations. Illustration 1 Invest Ltd has an accounting reference date of 31 March each year. On 1 April 2022, the tax written
down value of plant and machinery in the company’s main pool was £100,000 and special rate pool
is £0.
During the year ended 31 March 2023, Invest Ltd purchased new plant and machinery costing
£300,000 and new long life assets at a cost £1,400,000.
Compute Invest Ltd’s capital allowance claim for the year ended 31 March 2023.
£
Main pool (100,000 @ 18%)
18,000
130% FYA (300,000 @ 130%)
390,000
Special rate pool - AIA (max £1m)
- AIA (max £1m)
1,000,000
- 50% FYA (1,400,000 - 1,000,000) @ 50%
200,000
Capital Allowances claim
1,608,000
The remaining special rate pool expenditure of £200,000 will attract the 6% WDA from the next
accounting period
134
Only on
OpenTuition
you can find: Free ACCA notes
•
Free ACCA lectures
•
Free ACCA tests
•
Free ACCA tutor support
•
The largest ACCA community
