Accounting year to 5 April 2015

Main Pool Sp Rate Pool Allowances

WDV b/f 22,000
Additions qualifying for AIA
Long life asset 230,000
Machinery 45,000
AIA (Maximum) (200,000) 200,000
30,000
45,000
Other additions
Motor car (125g/km) 8,000
75,000 30,000
WDA @ 18% (13,500) 13,500
WDA @ 8% (2,400) 2,400
215,900
WDV c/f 61,500 27,600
Sale of plant and machinery
• When plant and machinery is sold in the accounting period,
the sale proceeds amount is deducted from the balance of the
unrelieved expenditure of the relevant pool
• Deduction up to a maximum of the original cost of the asset

The Small Pools WDA

• Where the tax wdv of either the main pool or special rate pool
prior to calculating the WDA is less than £1,000, the entire
balance may be taken as a WDA in that period
• The £1,000 is prorated if the accounting period is other than
12 months
Example 4

Beth prepares accounts to 5 April. The WDV as at 6

April 2014 of her main pool is £1,250. She purchases
machinery for £10,000 in the year and sells an item
of plant for £500 (cost £3,000).

Calculate her capital allowances for the year ended 5

April 2015.
 Beth’s Capital Allowances Computation
Accounting Year Ended 5 April 2015
Main Pool Allowances
WDV b/f at 6 April 2014 1,250
Additions Qualifying for AIA 10,000
AIA (10,000) – 10,000
Disposals (500)
750
Small pool WDA (750) 750
WDV c/f –
Total Allowances 10,750
Non Pool Assets

• In the following circumstances, assets will not go to either the

main or special rate pools but will instead have their own
separate column on the capital allowance computation:

(1) Assets with private use by the business owner, or

(2) Short life assets on which the taxpayer has made a

depooling election
Private use of an asset by the owner of the business
• Required where an asset is used by the owner of the business (sole
trader or a partner in a partnership) partly for business and partly
for private purposes (typically a motor car)
• Only the business proportion of the available capital allowances is
given
• This proportion is computed by reference to the percentage of
business use to total use
• The cost is not brought into the main or special rate pool, but must
be the subject of a separate column on the computation
• The WDA (or AIA or FYA) of the asset is based on its full cost but
only the business proportion of any allowance is actually given
• On disposal of the asset, a balancing adjustment is computed by
deducting sale proceeds from the tax wdv
• There is a balancing charge if sale proceeds exceed tax wdv, and a
balancing allowance if sale proceeds are less than tax wdv
Private use of an asset by the owner of the business
• Having computed the balancing adjustment, the amount assessed
or allowed is then reduced to the business proportion
• A balancing allowance is then added in to the capital allowances
of the period whereas a balancing charge will reduce the capital
allowances
• Private use by an employee of an asset owned by the business
has no effect on the business’s entitlement to capital allowances
• This is why the private use of an asset is irrelevant for companies,
as directors are treated as employees for this purpose
• Instead, there will normally be an employment income
assessment as a benefit charge on the employee or director (see
later chapter)
Example 5
Jane prepares accounts to 5 April. At 6 April 2014 the WDVs brought
forward are as follows: £
Main Pool 21,200
Motor car (115g/km) (used 30% for private purposes) 13,600
The following transactions took place during the year ended 31
December 2014:
10 May 2014 Purchased plant for £6,600
25 Jun 2014 Purchased a motor car for £10,600 CO2 emissions
of 100g/km to be used by an employee who will
use it 80% for business purposes
15 Oct 2014 Sold the motor car used privately for £9,400
16 Oct 2014 Purchased a motor car for £16,000 CO2 emissions
of 180g/km (used 30% for private purposes)

Calculate Jane’s capital allowances for the year ended 5 April 2015.
Accounting Year ended 5 April 2015
Main Pool Biz use car1 Biz use car2 Allowances
WDV b/f at 6 April 14 21,200 13,600
Additions Qualifying for AIA
Plant 6,600
AIA (6,600) - 6,600
Other additions
Motor car (CO2 100g/km) 10,600
Motor car (CO2 180g/km) 16,000
Disposal (9,400)
31,800 4,200 16,000
WDA @ 18% (5,724) 5,724
Balancing allowance (4,200)
× 70% 2,940
WDA @ 8% (1,280)
× 70% 896 .
Total Allowances 16,160
WDV c/f 26,076 – 14,720
Short-life assets
• An election can be made to omit short life assets from the
main pool and include them in their own individual column.
This is known as a ‘depooling election’
• This allows the acceleration of capital allowances on short-life
plant and machinery where they are sold at a low residual
value or scrapped within 8 years following the end of the
accounting period in which it was acquired
• Any plant and machinery that would normally go to the main
pool, except cars, can be treated as a short-life asset
• Capital allowances on each short-life asset are calculated
separately
• On disposal within 8 years of the end of the accounting period
in which the acquisition took place a balancing allowance or
charge arises, which would not occur if the item was pooled
• The election would only be worthwhile if a balancing
allowance was anticipated
Short-life assets
• If no disposal takes place within 8 years of the end of the
accounting period in which the acquisition took place the
unrelieved balance is transferred to the pool
• The transfer is immediately after the 8th anniversary of the end
of the accounting period in which it was acquired
• The AIA is available against expenditure on short life assets. If
expenditure is outside this limit then expenditure on main pool
items will qualify for a WDA of 18%
• The AIA could be matched with short life assets. However if
total expenditure on plant and machinery is above £200,000 the
AIA would be allocated to the main pool additions first
Example 6 (homework)
John prepares accounts to 5 April in each year.
At 6 April 2014 the WDV of the main pool was £16,000.
On 1 July 2014 John purchased machinery for £220,000
On 1 September 2014 John purchased a photocopier for
£4,000 and made a short life asset election
On 1 July 2015 the photocopier was sold for £1,500.

Calculate the capital allowances for years ended 5 April 2015

and 2016

Answer: 14/15 = 207,200

15/16 = 7,094
Balancing adjustments on the Main or Special Rate Pool

• A Balancing charge can arise at any time on the main pool or

special rate pool if disposal proceeds exceed the balance on
the pool
• If a net balancing charge arises on the capital allowances
computation this would be added to the adjusted trading
profit of the accounting period i.e. no WDA
• A Balancing allowance can only occur on the main pool and
special rate pool on cessation of the trade
• No AIA, WDA or FYA are available in the final accounting
period of the business
Example 7

Peter prepares accounts to 5 April. In the year ended 5 April

2015 the following transactions took place:

10 Apr 2014 Plant sold (originally purchased for £10,200) for

£8,600
01 Oct 2014 Second hand motor car (emissions 125g/km)
purchased for £2,000

The WDV on the main pool as at 6 April 2014 was £4,000

Calculate the balancing adjustment for the year ended 5 April

2015
Year ended 5 April 2015
Main Pool Allowances
WDV b/f at 6 April 2014 4,000
Addition – 1/10/14 2,000
6,000
Less Disposal 10/04/14 (8,600)
(2,600)
Balancing charge 2,600 (2,600)
WDV c/f -
Example 8

Kris prepares accounts to 31 December.

Kris ceased to trade on 31 March 2015 on which date all plant
and machinery was sold for £5,000.
The WDV on the main pool as at 1 January 2015 was £12,000.
Machinery was purchased on 1 February 2015 for £4,000

Calculate the balancing allowance for the accounting period

ended 31 March 2015
Accounting Period ended 31 March 2015
Main Pool Allowances
WDV b/ at 1 January 2015 12,000
Addition – 1 Feb 2015 4,000
16,000
Less Disposals – 31/03/15 (5,000)
11,000
Balancing allowance (11,000) 11,000
-
Preparing the Capital Allowance Computation
• List any tax written down values (unrelieved expenditure) on the
pools and any non-pool assets at the start of the accounting period as
given within the question
• List expenditure qualifying for AIA, in order, firstly special rate pool
and then main pool
• Add any expenditure in excess of the AIA limit to the relevant pool
• Add to relevant pool the cost of cars qualifying for WDA ie >95 g/km
• Deduct sale proceeds, to a maximum of original cost, of assets sold
during the accounting period from the relevant pool balance
• Deduct sale proceeds, to a maximum of original cost from the tax
WDV of any non-pool assets and compute the balancing adjustment
• Compute available WDA’s on the Tax WDV’s computed and deduct
• List any new low emission cars purchased during the accounting
period and claim the available 100% FYA
Full Pro forma Capital Allowances Computation

Note (a): AIA allocated to Special Rate Pool items first, then Main Pool
Full Pro forma Capital Allowances Computation...continued

Note (b): If the balance on the main pool and /or special rate pool is ≤ £1,000 for a 12 month
accounting period, the small pool WDA could be claimed
Example 9 (comprehensive)
Ling prepares accounts to 31 March.
The WDV of the main pool at 1 April 2016 was £30,000, and on a car
(120g/km) £14,000. The car was used by Ling 20% for private use.
The following transactions took place during the year ended 31 March 2017:

06 May 2016 Purchased a motor car (emissions 70g/km) £17,000

10 Jun 2016 Purchased computer equipment £60,000
25 Jun 2016 Purchased a machine £84,000
07 Sep 2016 Purchased plant £60,000
10 Nov 2016 Purchased a motor car (emissions 115g/km) £11,200
03 Dec 2016 Purchased thermal insulation for business building £28,000
09 Dec 2016 Disposed of the car used privately by Ling £8,000

Calculate the capital allowances for year ended 31 March 2017. No short life
asset election has been made in respect of the computer equipment.