Can I ask I have fixed assets which are general office equipment that I intend to classify as Short Life Assets.
Therefore when calculating the capital allowances I will be apply WDAs of 25% per annum.
In terms of the layout, Can I term this group of assets the Short Life Pool in the CT600 computations? I am assuming that in terms of layout I can represent this exactly like the General Pool. Ie:- list the register and then perform the NBV begining of year and end of year just as the General Pool of assets?
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Er...
... yes, a short-life asset pool (for a single asset) works almost exactly the same way as the general pool, except that there will be a balancing adjustment (hopefully an allowance) when the asset is disposed of (rather than having to wait until the qualifying activity ceases).
However, you appear to be under at least one misconception.
As mentioned above, a short-life asset pool is technically for a single asset. In practice HMRC will accept the use of pools comprising more than one asset for computational purposes, provided that come disposal of any individual asset, you can identify its NBV prior to the disposal in order to calculate the balancing adjustment.
A short-life asset election is only worth making for an asset that is likely to be disposed of (for less than nbv at the time of disposal) within 8 years (4 years for expenditure incurred before 1 or 6 April 2011, for companies and non-corporates, respectively). It must also be possible to identify when the asset has been disposed of so that you can get the benefit of the election.
In my experience the election does not work well for general off equipment, as this tends not to be clearly identified as having been disposed of; quite often it isn't.
I've seen people making elections for computer equipment, that will just end up being shoved in a cupboard and forgotten about at the end of its useful life; and that is not a disposal.
Anyway, I mentioned a misconception.
The rate of WDA has not been 25% since 2008 (it was reduced to 20% in 2008, and a new 10% rate was introduced). The rates were reduced to 18% and 8% in 2012.
If you are dealing with expenditure to which the earlier rates apply, you are out of time to make a short life asset election (unless it is in the course of an enquiry or in response to a discovery assessment).
If the rate is 25% because these aren't plant and machinery capital allowances, the short-life asset treatment isn't available.
If it is plant and machinery, short life asset treatment may not be appropriate in any event, if the expenditure can be relieved by way of AIA.
AIA
My second point would be why are you not using AIA for 100% allowances in year one - is it an LLP with corporate members, or are there additions in excess of the AIA limit?
@OP
Are we to assume you have spent the last 8 years over-claiming writing down allowances?
Just wondering?
How old ?
Nope first year doing it, hence my questions
How old is that text book you're using ?
Generally, short life asset treatment is only beneficial if you can't claim AIA and you intend to make a huge loss on the eventual disposal. If you think there'll be a balancing charge you're probably better leaving them in the pool.
Office equipment...
... is plant if it is not machinery. It should go in the general pool, unless AIA is claimed or an SLA election is made.
In my view, the directors should be advised to claim AIA.
In which case ...
... AIA cannot apply as they are second hand assets... is plant if it is not machinery. It should go in the general pool, unless AIA is claimed or an SLA election is made.
In my view, the directors should be advised to claim AIA.
Thanks for your excellent advice Steve
Directors don't really want to claim AIA as the assets were purchased via a Management Buyout of assets of a company, where the Directors were part of the company which owned the assets. The water is a little murky, didn't want to claim AIA, as this seems to be a bit of a grey area.
Second Hand
... AIA cannot apply as they are second hand assets
It's not that they're second hand. It's that they're purchased from a connected party.
I wouldn't want folk thinking that they couldn't claim AIA on that ex-Royal Mail van they bought at the auction.
Phew, that's OK then.
I agree with Steve; there are very few cases when it is not advantageous for a company to claim AIA.