Long period of account and cessation

Client has a 72 week period and apportioning capital allowances

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The client has a long period of account going from 01/04/2017-19/07/2018 (72 weeks)

I have apportioned the profit on that basis :- for example £72000 /72*52

Period 1 (17/18) £52000

Period 2 (18/19) £20000

I have then deducted the balancing allowances from Period 2 profit.

Period 2     £20000

B/Allow     (£5000)

Assessable £15000

A collegue is saying shouldnt the net profit just be apportioned - ie

Period 1 (72000-5000)/72 *52 = £48389

Period 2   Balance                      =£23611

 

 

Replies (3)

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RLI
By lionofludesch
19th Dec 2018 15:25

Your colleague is correct.

It's been like that since current year basis started in 1996.

However, your numbers don't seem right. They should add up to £67k (£72k - £5k).

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Replying to lionofludesch:
Quack
By Constantly Confused
19th Dec 2018 15:41

lionofludesch wrote:

Your colleague is correct.

It's been like that since current year basis started in 1996.

However, your numbers don't seem right. They should add up to £67k (£72k - £5k).

I've learned something new there, never had to do it in practice, but if I had a long period that passed into another tax year I would have done two periods for capital allowances to match the basis periods.

You live and learn!

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Replying to Constantly Confused:
RLI
By lionofludesch
19th Dec 2018 15:55

Well, that may or may not be the optimum position. Doing it as one period spreads it evenly. Doing it as two doesn't necessarily spread it evenly but it might be what you want.

A bloke retiring might be chuffed to have a big balancing allowance in the final period, for instance, to soak up his personal allowance.

The answer is actually to draft separate periods and add them together if a long period gives a better outcome.

There's no universally right answer.

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