Taxation with Ratio

Contents Page

Abstract 1

Introduction 1

First-year allowances (FYA) 2

Writing down allowance (WDA) 3

Pooling 3

Non-pooled assets 4

Capital Expenditure 4

Allowance available 5

Enhanced Capital Allowances 7

The disposal of an asset(s) 7

Termination of a trade 8

Balancing charge and allowance 8

Roll-over relief 8

Conclusion 9

Reference 10

Bibliography 11

Capital Allowance

Abstract

This report examines and discusses the main concepts of capital allowance.

I will be discussing how the UK taxation system provides tax relief for different types of likely capital expenditure which could be acquire by a company this report will also examining the taxation implications of capital assets which are disposed of by a company or in some cases replaced with new assets. An evaluation will be conceded on my views on whether capital allowances would encourage increased investments.

Introduction

Capital Allowance can be claimed on capital expenditure incurred on the plant and machinery for use in a company’s trade. It is an obligation of the legislation that as a result of incurring the expenditure the machinery or plant belongs to the person making the claim. Capital allowances are given on plant and machinery used in the UK property business and on the industrial buildings and some forms are given for a trading business.

Capital allowances give a business tax relief for capital expenditure on qualifying assets.

A company can claim tax allowances, know as capital allowances, on certain purchases or investments. This means the company can subtract a percentage of these costs from their taxable profits and reduce their tax bill.

First-year allowances (FYA)

First-year allowances are increased rates of allowances. First year allowances allow a greater proportion of the cost of an investment to qualify for tax relief against a business’s profits of the period during which the investment is made.

❖ Medium sized businesses get 40% on plant...