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Capital Allowances sample slides

Capital Allowances sample slides. Objectives. Summarise the history of capital allowances Define ‘Machinery’ Explain ‘Plant’ and identify plant categories Understand and apply case law Recognise who can claim Formulate expenditure calculations

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Capital Allowances sample slides

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  1. Capital Allowances sample slides

  2. Objectives • Summarise the history of capital allowances • Define ‘Machinery’ • Explain ‘Plant’ and identify plant categories • Understand and apply case law • Recognise who can claim • Formulate expenditure calculations • Identify pools and combine with tax allowances • Spot and assess section 198/199 elections pre April 2012 • Assess and establish section 198/199 elections post April 2012 • Understand the end to end claims process

  3. Understanding Machinery • Machinery is not defined in statute or case law • Use the every day accepted definition of machinery – • ‘typically a device or assembly of interconnected fixed and movable parts, which transmits force to do useful work and often (but not always) has a power supply’ • HMRC accept this with a few strange quirks!

  4. Understanding Plant • Plant is far more complicated no prescribed list from HMRC • Much argued debate, use established practices and case law Case Law check list: • plant as apparatus • durabilityof the asset • ‘functional’test • ‘completeness’ test • ‘business use’ test • ‘premises use’ test

  5. Plant – ‘Apparatus’ Yarmouth v France (1887) ‘includes whatever apparatus is used by a businessman for carrying on his business – not his stock-in-trade which he buys or makes for sale; but all his goods and chattels, fixed or moveable, dead or alive, which he keeps for permanentemployment in his business’.

  6. Plant – ‘Durability’ HMRC v Maden and Ireland Ltd (1959) ‘The intention, no doubt, is to keep and use the knives for so long as they are serviceable.’ ‘I cannot regard the circumstance that they wear out in a relatively short period as investing them with so transitory a character as to take them out of the category of plant to which they would otherwise belong.’

  7. Integral Features • 2008 new rules introduced where expense is incurred on the provision or replacement of an integral feature • Section 33A of the CA defines integral features as: • electrical and lighting system, cold water systems • space/water heating systems, powered systems of ventilation/air cooling/air purification (inc floors/ceilings comprised in such a system) • lift, escalators and moving walkways • external solar shading

  8. P&M Calculations Apportionment Formulae Q = P X A / ( B + C ) Q= qualifying expenditure P= purchase consideration A = replacement costs of the qualifying assets B= replacement cost of the whole building C= the land value (i.e. bare site value)

  9. Examples Purchase Price £1 million Allowances £200,000 Purchase Price £1million Allowances £400,000 Purchase Price £400,00 Allowances £240,000

  10. First Year Allowance Introduced for different types of expenditure at various times • Electric cars and cars with low CO2 emissions, on or after 2002 but before April 2014 at rate of 100% • Water-conserving plant after April 2003, at 100% • Anyexpenditure incurred in the 12 months beginning April 2009 to 2010 at 40% • Energy-saving P&M on or after April 2001 at 100% etc…

  11. Capital Expenditure Main pool Class pool/Special Rate Pool Small Pool Single Asset pool AIA FYA Writing Down Allowance 18% 100% if under £1000 Writing Down Allowance 8%

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