Capital allowances error?

Capital allowances error?

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I have just started the accounts for a new client and am look at last years CT600 and tax comp from the previous advisor and I think there may be an error on AIA claimed and am looking for a second opinion.

Company year end 31 March 2013, additions in the year were £130k and £80.4k of AIA has been claimed. (am presuming it is 9/12ths x £25k + 3/12ths x £250k with daily rounding) with CAs at 18% on the balance

However on looking at the asset register all the additions were in June and July 2013 – ie the earlier period when only £25k of allowance was available

Should therefore the claim have only been £25k as that is when the assets were added with the remainder only qualifying for 18% . I think it is the case but I always like to check as these darn AIA changes in bands gets me every time!

If it is the earlier they have underpaid tax paid some 10k and obviously this will need addressing

Replies (3)

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paddle steamer
By DJKL
07th Aug 2014 13:54

Presume you mean June July 2012 not 2013
HMRC website appears to agree with you, see below

 

 

http://www.hmrc.gov.uk/capital-allowances/plant.htm#12

 

 

If the AIA changed during your accounting period

The AIA applies only to expenditure on or after 6 April 2008 for Income Tax, or 1 April 2008 for Corporation Tax. The maximum annual amount of AIA has changed several times. If your accounting period spans the dates when the AIA changed, there are special, transitional rules for calculating how much allowance you can claim. The maximum amount of the AIA was increased from £25,000 to £250,000 for a temporary period of two years for expenditure on or after 1 January 2013.

If your accounting period spans 1 January 2013

If your accounting period began on or after 6 April 2012, you calculate your maximum AIA for this period in 2 parts:

The AIA entitlement, based on the previous £25,000 annual cap for the portion of a year falling before 1 January 2013The AIA entitlement based on the new £250,000 for the portion of a year falling on or after 1 January 2013Example:

For the period 6 April 2012 to 5 May 2013 you calculate your maximum AIA entitlement based on both:

the proportion of a year  from 6 April 2012 to 31 December 2012 , that is 9/12 x £25,000 = £18,750The proportion of a year from 1 January 2013 to 5 May 2013, that is 4/12 x £250,000 = £83,334

The maximum AIA for this period is £18,750 + £83,334 = £102,084 but you cannot claim more than £25,000 AIA for the first period.

Example

Your accounts run from 6 April 2012 to 5 April 2013. You spend £35,000 in total on general equipment during the year all before 1 January 2013 and the total expenditure was pooled. You can claim £25,000 AIA. The balance of £10,000 will qualify for 18% WDAs. So you can claim £25,000 AIA plus £1,800 WDA. The balance to be carried forward to the next year is £8,200

 

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By Paul D Utherone
08th Aug 2014 09:04

That the claim was £80k

and not £83k suggests that some review has been made and the claim is restricted. Perhaps ask the predecessor for futher detail?

Certainly on the question as posed the max AIA appears to be £25k

Thanks (0)
RLI
By lionofludesch
08th Aug 2014 10:46

Unduly complex

These AIA rules are unduly complicated.  I've no idea why HMRC see the need to have separate caps for each part of the period.

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