ACCA paper p6 advanced taxation ATX class notes

CHAPTER CONTENTS BACKGROUND AND THE EXAM FOCUS --- 18 COMPANIES AND CORPORATION TAX --- 22 WAYS OF FINANCING A COMPANY --- 23 DEFINITIONS AND TERMS FOR CORPORATION TAX --- 24 PROFORMA CO

ACCA Paper P6 (UK)

Advanced Taxation

(ATX) Class Notes

© Interactive World Wide Ltd, May 2015

All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,

Contents

PAGE

CHAPTER 7: CAPITAL GAINS TAX – SHARES AND SECURITIES 245

CHAPTER 10: INCOME TAX, INVESTMENT ADVICE AND OVERSEAS ASPECTS 331

CHAPTER 13: NATIONAL INSURANCE AND SELF - ASSESSMENT 449

CHAPTER 17: CORPORATION TAX – GROUPS AND OVERSEAS ASPECTS 589

Introduction to the

paper

AIM OF THE PAPER

To develop knowledge and skills relating to the tax system as applicable to individuals, single companies, and groups of companies

OUTLINE OF THE SYLLABUS

6 Tax for companies

7 Stamp duty and Stamp duty land tax

8 Value added tax

9 Interaction of the taxes and the mitigation of tax

FORMAT AND BACKGROUND OF THE EXAM PAPER

Background about the P6 Exam and the P6 Examiner

Rory Fish, the P6 examiner, has now set eighteen Advanced Taxation exams including the old syllabus 3.2 exams for the December 2006 and June 2007 exams, the pilot paper and the P6 exams from December 2007 to December 2014 inclusive

The only way to pass this very challenging exam is to practice as many past exam questions set by Rory Fish as possible

The examiner has written several articles and has stated that students should not expect questions to be set based on any articles he has written

Format and content of the P6 Exam

The only area of the syllabus that the examiner has stated will be tested for certain

in every P6 exam is the topic of Ethics and this will appear in all papers and will be worth at least 5 marks

The rest of the syllabus can be tested anywhere in section A or B The examiner has stated, however, that those areas of the syllabus which are new to P6 (not tested in F6) are likely to feature more frequently in P6 exams

Section B

Two questions out of a choice of three

A total of 40 marks in this section with each question being 20 marks The examiner has stated that questions in this section will be more structured than the questions in section A, with headings and more guidance

Tax rates and allowances given in P6 to be used for the June 2015 and December 2015 exams

SUPPLEMENTARY INSTRUCTIONS

1 You should assume that the tax rates and allowances for the tax year 2014/15 and for the financial year to 31 March 2015 will continue to apply for the foreseeable future unless you are instructed otherwise

2 Calculations and workings need only be made to the nearest £

3 All apportionments should be made to the nearest month

4 All workings should be shown

Additional rate £150,001 and above 45 37.5

A starting rate of 10% applies to savings income where it falls within the first

£2,880 of taxable income

Personal allowances £

Born on or after 6 April 1948 10,000

Born between 6 April 1938 and 5 April 1948 10,500

Income limit

Personal allowance (born before 6 April 1948) 27,000

Car benefit percentages

Car fuel benefit

The base level figure for calculating the car fuel benefit is £21,700

Authorised mileage allowance payments (AMAP)

Pension scheme limits

New individual savings accounts (NISAs)

New individual savings accounts – the investment limit £15,000

Child benefit income tax charge

Where income is between £50,000 and £60,000, the charge is 1% of the amount of the child benefit received for every £100 of income over £50,000

Residence: number of ties needed to be UK resident

Days in UK Previously UK resident Not previously UK resident

Less than 16 days Automatically not UK

resident

Automatically not UK resident

16 to 45 Resident if 4 UK ties Automatically not UK resident

46 to 90 Resident if 3 UK ties Resident if 4 UK ties

91 to 120 Resident if 2 UK ties Resident if 3 UK ties

121 to 182 Resident if 1 UK tie Resident if 2 UK ties

183 days Automatically UK resident Automatically UK resident

CO2 emission between 96 and 130 grams per kilometre 18%

Annual investment allowance

Marginal relief

(U – A) × N/A × Standard fraction

Patent box deduction

Net patent profit x 70% x [(MR-10%)]/MR

Where MR is the main rate of corporation tax

Value added tax

Inheritance tax: nil rate bands and tax rates

Rate of tax on excess over nil rate band - Lifetime rate 20%

Rates of interest

Stamp duty land tax

(1) For residential property, the nil rate is restricted to £125,000

(2) The 5% and 7% rates only apply to residential properties only

Stamp Duty

Shares 0.5%

Capital gains tax

£ Annual exempt amount for individuals 11,000

Annual exempt amount for a trustee 5,500

PASS RATES FOR THE P6 EXAM

THE SECRET OF SUCCESS IN PASSING THE P6 EXAM

Learning tax is like building a house You need a strong foundation P6 is not a

difficult exam – although it is challenging! It builds on the knowledge you acquired

at F6 and it adds new tax knowledge And it also requires a different “mind set”

compared to the basic F6 exam since the questions in P6 are open-ended in

structure (as is to be expected in any advanced exam)

You might be saying to yourself “Help”! I’ve forgotten a lot of F6 and anyway

haven’t a lot of the rules changed since I did F6? And what is this new P6 tax

knowledge? And what is this more open-ended mind set I need to master?

Yes, you might have forgotten the basics of F6 and, yes, tax changes every year

with the new Finance Act Fear not, these Notes will get you up to speed And fear

not on the new knowledge and new mind-set – these Notes aided by your lecturer

are the ticket

So the three things you need to master are:

● Basics of F6

● New P6 knowledge

● New mind-set to answer P6 style questions

Accordingly, each chapter of these notes has the following structure:

1 Basics of F6

Most chapters of your Class notes begin by revising the fundamentals of F6 This

F6 knowledge is indicated in the class notes by the headings being in italics (these

parts are mainly self-study) So make sure you cover this part of each chapter

before attending class (whether online or otherwise)

2 Additional knowledge which is only covered at P6

This stage then adds on the new P6 more involved extra knowledge This is

indicated by non-italic headings in the class notes (these parts will be covered

during the P6 lectures)

3 Practice answering P6-style questions

Each topic includes a number of small tutorial examples Some are phrased in an

F6 style (being in italics); others are phrased in a P6 style (open-ended and less

structured than F6 style questions) (not in italics) Some of the latter examples will

be worked during the class and others will be set for homework

Get the necessary exam technique, this is achieved by doing lots of exam standard

expose you to exam questions you will be given an exam question on each major area for you to attempt at home in your own time It is essential that you find the time to do this homework Failure to do this may result in misunderstanding and panic in the revision phase

I started by saying P6 is a challenging exam So it’s not a free lunch! None of the advanced optional papers are You absolutely have to put in the work by doing the three steps above

I look forward to seeing you on our course

Chapter 1

Fundamentals of corporation tax

ANALYSIS OF PAST EXAM QUESTIONS

CHAPTER CONTENTS

BACKGROUND AND THE EXAM FOCUS - 18

COMPANIES AND CORPORATION TAX - 22

WAYS OF FINANCING A COMPANY - 23

DEFINITIONS AND TERMS FOR CORPORATION TAX - 24

PROFORMA CORPORATION TAX COMPUTATION 25 PROFITS FROM TRADING - 26

ADJUSTMENT OF PROFIT PROFORMA 28 ADJUSTMENT OF ACCOUNTING PROFIT TO THE TAX ADJUSTED ACCOUNTING PROFIT 28 ALLOWABLE AND DISALLOWABLE EXPENSES 29 INTANGIBLE FIXED ASSETS 30 PATENT BOX DEDUCTION 32 RESEARCH AND DEVELOPMENT EXPENDITURE 33 CAPITAL ALLOWANCES ON PLANT AND MACHINERY 38 PROPERTY BUSINESS PROFITS - 47

PROFORMA FOR PROPERTY BUSINESS PROFITS OR LOSSES 47 ALLOWABLE EXPENSES WHEN COMPUTING PROPERTY BUSINESS PROFITS AND LOSSES 48 PREMIUM RECEIVED ON THE GRANT OF A SHORT LEASE 48 PROPERTY BUSINESS LOSSES 48 INTEREST INCOME PROFORMA - 50

NON-TRADING DEFICIT 50 CHARGEABLE GAINS - 51

PROFORMA FOR CHARGEABLE GAINS AND CAPITAL LOSSES 51 CAPITAL GAINS ROLLOVER AND HOLDOVER RELIEF 54 CAPITAL GAINS – THE SUBSTANTIAL SHARE EXEMPTION 56 THE CORPORATION TAX LIABILITY - 57

COMPUTING THE CORPORATION TAX LIABILITY - 58

SELF ASSESSMENT FOR COMPANIES - 59

DUE DATE FOR PAYING CORPORATION TAX AND FILING THE RETURN 59 COMPLIANCE CHECKS INTO SELF-ASSESSMENT CORPORATION TAX RETURNS 63

LONG PERIOD OF ACCOUNT - 67 TRADING LOSS MADE BY COMPANIES - 68

OBJECTIVES WHEN DECIDING HOW TO USE THE TRADING LOSS 68

POSSIBLE WAYS OF RELIEVING A TRADING LOSS MADE BY A

COMPANY - 69

GROUPS AND CORPORATION TAX - 78 MARGINAL RATES OF CORPORATION TAX - 79 ANSWERS - 82

BACKGROUND AND THE EXAM FOCUS

Questions on corporation tax are tested frequently at P6, sometimes at a very advanced level

Corporation tax is studied at F6 (Taxation) and the purpose of this chapter is to revise the basic principles studied at F6 This chapter will include revising how companies compute corporation tax and the factors which will increase or decrease the corporation tax liability of a company The chapter will also build on your F6 knowledge up to the level required at P6

Questions at P6 will require explanations of the tax implications of a company’s transactions Questions will also include self assessment and loss relief for individual companies and groups

The following terminology will be used in all P6 exams

Income statement Statement of profit or loss

Example 1 - Kestrel Ltd – Large question

Kestrel Ltd, a manufacturing company in the United Kingdom, has one associated company The statement of profit or loss for the six months to 31 December 2014

shows a profit before taxation of £540,620, after accounting for the following items

Interest payable on loan notes 12,000 Note a

Research and development expenditure 45,000 Note d

Income

Notes:

(a) This represents interest on loan notes issued by Kestrel Ltd in 2004 to provide funds to build a factory extension The figure of £12,000 includes accrued interest of £3,000

(b) This represents interest paid on a ten-year loan raised by Kestrel Ltd to purchase property which is currently let to another company

(c) The figure for patent royalties includes an accrued amount of £2,000 The other £8,000 was paid in August 2014

(d) During the year ended 31 December 2014 Kestrel Ltd spent £45,000 on staffing costs and consumables researching and developing the necessary technology Kestrel Ltd is a large enterprise for the purposes of enhanced relief available for research and development expenditure The company wants to claim the above the line tax credit in respect of this research and development expenditure

(e) The loan interest receivable is in respect of a loan made by Kestrel Ltd to a supplier, and the figure of £6,000 includes an accrued amount of £1,500 (f) The rents receivable relate to the property let by Kestrel Ltd

(g) Dividends are received from a foreign company and Kestrel Ltd owns 10% of the shares in the foreign company

Kestrel Ltd had the following balances for capital allowances purposes brought forward at 1 July 2014

£9,500 (incl.) and a second with CO2 emissions of 140 grams per kilometre costing

£14,000 (incl.) both acquired in October 2014

Kestrel Ltd had a new factory constructed at a cost of £1,171,740 that the company brought into use on 1 November 2014 The cost is made up as follows:

£ Land

Central heating and ventilation system

Electrical lighting system

Factory

VAT

360,000 38,000 22,000 142,000 30,000 115,000 65,000 50,000 154,450 195,290 - 1,171,740 - Kestrel Ltd is a VAT registered business

(a) Kestrel Ltd  Capital allowances calculation for the six months to 31

December 2014

Pool

Special Rate Pool

Short Life Asset

Capital allowances

AIA additions in the CAP

SRP

Lift

Central heating

Electrical lighting

Less:AIA

AIA additions in the CAP

MP

Plant

VAT (1/6)

-

-

Less: AIA ( ) -

-

High CO2 car Disposals _ Balancing allowance =====

WDAs

COMPANIES AND CORPORATION TAX

Companies which are UK resident pay corporation tax on their worldwide income and chargeable gains You will have studied corporation tax computations for a single company, groups of companies and overseas aspects at F6 The main purpose of this chapter is to revise the principal elements of single companies, update for the changes introduced by recent Finance Acts and expand the fundamentals of corporation tax for any additional topics which are only relevant to P6

This session will revise the key aspects

(a) of financing a company business

(b) factors that increase/decrease taxable total profits

(c) of calculating the company’s corporation tax liability

(d) of getting relief for corporation tax losses – capital losses, non-trading deficits, property business losses and trading losses

(e) of self-assessment for companies

(f) of 75% loss groups

WAYS OF FINANCING A COMPANY

If a company needs to raise capital to buy plant and machinery, increase working capital or buy an investment property it has two choices: it can either finance using debt or equity

The examiner is going to use international accounting standard terminology, which means that previous terminology would refer to debt as debentures or corporate bonds but under the international accounting standard terminology the examiner will refer to debt as loan notes

Debt versus equity

Description of

finance

Cost of finance Tax implications and the effect on

the company’s tax

● The cost of issuing the loan notes such as legal costs and advertising costs are an allowable expense

● The interest payable on the loan notes is also an allowable

expense

● These costs will reduce taxable trading profits if the loan is for trading purposes

● These costs will reduce interest receivable if the loan is for non-trading

● The cost of issuing the shares is a disallowable expense

● The dividend paid to shareholders

is also a disallowable expense (no effect on the tax paid by the company)

DEFINITIONS AND TERMS FOR CORPORATION TAX

UK resident companies pay corporation tax on their taxable total profits (TTP)

for a chargeable accounting period (CAP) TTP = Income + Chargeable Gains – Qualifying charitable donations

What to do when a company starts to trade

The company must notify HMRC within three months of commencement that they have started trading This allows HMRC to set up all the necessary records The company must also notify HMRC of their chargeability to tax within twelve months from the end of the first accounting period Failure to notify HMRC of the company’s chargeability to corporation tax within the 12 month period may result

in the company incurring penalties These penalties will depend on the company’s behaviour they are set out below

Chargeable accounting period and the period of account

(a) The CAP is usually but not always the ‘period’ for which the company has prepared accounts

(i) A period of account is any period for which a company chooses to prepare accounts The maximum length of the period of account is 18 months

(ii) A chargeable accounting period is the period for which a charge to corporation tax is made

(b) A CAP can be any length up to 12 months but cannot exceed 12 months (c) If a company prepares accounts for a period in excess of 12 months, the period must be divided into two separate chargeable accounting periods as follows

(i) A chargeable accounting period for the first 12 months

(ii) A separate chargeable accounting period for the balance of the period of account

Example

A company prepares accounts for the 15 month period from 1 January 2013 to 31 March 2014 List the two chargeable accounting periods

Proforma corporation tax computation

£

P Profits from trading (adjusted profits less capital allowances) X

R Research and development credit (for a large enterprise)

Amount received from HMRC (10% x research expenditure) X

C Chargeable gains (chargeable gains less capital losses) X

Less: Patent box deduction

Net patent profit x 70% x (MR – 10%)

MR

(X) _

Part 2

Less: Tax credit for research and development for large enterprise

(10% x research expenditure)

Corporation tax payable/(repayable - note)

Note

The maximum amount repayable can never exceed the PAYE

and NIC payable in respect of staff used to carry on the

research and development

(X) - X/(X) -

Due date 9 months and one day after the end of the CAP

(unless a large company which pays in quarterly

instalments)

File date 12 months after the end of the period of account

(a) In general a company’s income is computed in accordance with income tax

THE TAXABLE TOTAL PROFITS – PART 1

Less: Patent box deduction

Taxable total profits

(X) -

X -

PROFITS FROM TRADING

A company’s taxable trading income for an accounting period consists of its trading profits for that period, as adjusted for tax purposes The starting point for the calculation is the company’s pre-tax profit for the relevant period of account This figure is then adjusted by excluding non-trading income, adding back disallowed expenses and deducting any capital allowances that are claimed

Example 2 – Alpha Limited

Alpha Ltd has prepared a statement of profit or loss for the year ended 30 September 2013

£

Less:

Cost of issuing loan notes – (finance is used for trading purposes) (750)

Staff costs (includes accrued management bonuses of £10,000 paid

(Cost of patent rights £40,000 written off on a straight line basis over 10 years)

(Lease has 21 years when granted)

Hire of a car with CO2 emission 136 grams per kilometre (2,400)

Required:

Compute the taxable trading profits for the year ended 30 September

2013

Adjustment of profit proforma

Adjustment of accounting profit to the tax adjusted accounting profit

Consider each item of exp which has been

debited and decide Allow – LEAVE

Step 3

(a) Consider each item of income which

has been credited and decide

Trading – LEAVE Non Trading – DEDUCT

(b) Deduct any missing expenditure

(e.g premiums paid on short lease)

(c) Add any missing income

x

x

x

Step 4

Deduct capital allowances on plant and machinery

(this will normally be done in a working) x

Allowable and disallowable expenses

Calculation of the taxable trading profits – showing trading income and some allowable expenditure

£

 Trading profit

 Patent royalties receivable

 Profit on disposal of an intangible fixed asset

(sale proceeds – net book value)

 Staff costs (salary+ bonus +class 1 secondary

NIC+ Class 1 A NIC + pension contributions)

(Bonuses accrued at the end of the CAP are allowable

provided they are paid within 9 months of the end of the

accounting period)

 Impairment loss

 Issue costs for loan notes/ debentures/ corporate

bonds if issued for trading purposes

 Cost of setting up/ obtaining HMRC approval for a

share option plan/share incentive plan

 Interest payable on trading loans

 Loan arrangement fees (for trading loans)

 Patent royalties payable

 Research and development (enhanced relief)

 Amortisation of intangible fixed assets

 Premium paid on the grant of a short lease

(Rent part/number of years on the lease)

 Loss on disposal of an intangible fixed asset

(sale proceeds – net book value)

 Pre-trading expenditure provided it is incurred

within 7 years of the business commencing

 Capital allowances on plant and machinery

Taxable trading profit/(loss)

X

X

X (X) (X) (X) (X) (X) (X) (X) (X) (X) (X) (X) (X) (X)

X/(X)

Expenses which are disallowable when computing the taxable trading profits

Description of expense

Intangible fixed assets

Companies may incur expenditure in relation to intangible fixed assets

Examples of intangible fixed assets:

● Goodwill

● Patents and copyrights

● Intellectual property

Tax relief for expenditure on intangible fixed assets

● Expenditure on IFAs reduces the taxable trading profits of the company Amortisation of the intangible fixed asset is an allowable expense In most cases, the amount of the allowable deduction is equal to the amortisation charged in the company’s statement of profit or loss

● If an intangible fixed asset is amortised over a very long period, the company may elect for the IFA to be subject to a fixed rate allowance of 4% per annum straight line

● The election must be made within two years from the end of the accounting period in which the IFA is acquired

● On disposal of an intangible fixed asset a company will have either a profit or loss on the disposal of the intangible fixed asset This will be the sale proceeds less the net book value This profit or loss on disposal will either increase or decrease the taxable trading profits in the accounting period of disposal

Example 3 – Amortisation of goodwill

Alpha Ltd acquires goodwill during its nine month accounting period to

31 December 2013 for a cost of £100,000 and does not propose to amortise it The company has trading profits of £250,000 in this period

Patent box deduction

A company which owns a patent (and has significantly contributed towards the development of the patented invention) may elect into the “patent box” regime and

so benefit from paying a lower rate of corporation tax on the amount of its trading income which is derived from patent profits (e.g patent royalties, income from the sale of patents etc.)

Under the patent box regime the patent profits will be subject to corporation tax at

a reduced rate of 10% This is achieved by making an additional deduction in the corporation tax computation

The benefit of this regime is being phased in over five years and companies can only benefit from the 10% rate on 70% of the patent profits in the year ended 31 March 2014, the remaining profit will be taxed at the normal way

The patent box formula is given in the exam in the rates and allowances section Patent profit (this will be given in the question) x 70% x (MR – 10)/MR

MR = the main rate

Example 4 – Patent box deduction

The trade of Gamma Ltd consists of baking high quality cakes Gamma Ltd also develops new baking processes and techniques which it has patented It uses these processes and techniques itself and licences the patents to other manufacturers It has taxable trading profits of £3,000,000 This figure includes £200,000 of net patent profits

Required:

Compute the corporation tax for the year ended 31 March 2015 and provide a reconciliation showing the rate/rates of tax that have been applied in calculating the corporation tax liability Your answer should describe the operation of the regime

Research and development expenditure

Companies incurring research and development expenditure

Revenue research expenditure is an allowable expense and reduces the company’s trading profits and therefore reduces corporation tax

Allowable revenue research expenditure includes:

Company gets enhanced relief

225% of the amount spent

Key point

Where a SME makes a trading loss, it may claim a repayment from HMRC this is called a R&D tax credit which is 14.5% of the surrenderable loss The surrenderable loss is the lower of:

1 The trading loss after the current year claim (S.37 CTA 2010) and any group relief claimed

2 The qualifying research and development expenditure multiplied by 225%

By claiming the repayment of the R&D tax credit this will result in the amount of trading loss available to carry forward being reduced by the surrenderable loss

Example 5 – Rolly Ltd

Rolly Ltd is a small company for the purposes of research and development expenditure It spends £20,000 on qualifying research and development expenditure in the year ended 31 March 2015

Rolly Ltd has a trading loss of £50,000 (before adjusting for the expenditure on research and development)

In the year to 31 March 2015 the company has realised a chargeable gain of

in relation to their qualifying R&D expenditure

Operation of the scheme

● In general the 10% tax credit is not received by the company but is deducted from their corporation tax liability for the period concerned

● If the amount of the 10% tax credit exceeds the company’s tax liability for the period, the excess is paid directly to the company by HMRC The repayment is restricted to the company’s PAYE and NIC liability in respect of their wages bills included in qualifying R&D expenditure

● The amount of the 10% tax credit must be added to the company’s taxable total profits and included as part of their income

How the corporation tax proforma changes if this alternative treatment is claimed for the research and development

expenditure

P Profits from trading (adjusted profits less capital allowances) X

O Overseas income (gross of overseas tax suffered) X

R Research and development credit (for a large enterprise)

amount received from HMRC (10% x research expenditure)

X

C Chargeable gains (chargeable gains less capital losses) X

- Part 2

Less: Tax credit for research and development for large enterprise

Corporation tax payable/(repayable - note)

(X) - X/(X) - Note

The maximum amount repayable can never exceed the PAYE and NIC payable in respect of staff used to carry on the research and development

Example 6 – Research and development expenditure for a

large enterprise

In the year ended 30 June 2015 Beta Ltd has taxable trading profits of

£2,000,000 after deducting allowable research and development expenditure of

£300,000 You should assume that Beta Ltd is a large enterprise for the purposes of research and development expenditure

Required:

Advise Beta Ltd as the tax reliefs available for the research expenditure incurred and make a recommendation as to which of the two possible treatments they should apply

Premium paid of a short lease (< 50 years) for a building used for trading purposes

Premiums are paid once at the start of the lease

Tax treatment of the lease premium paid

The part that is defined as the capital element is disallowable The balance of the premium paid is treated as rent paid in advance and is an allowable expense spread over the number of years on the lease

Premium paid for a short lease on premises

Part of the premium paid is treated

as a capital payment

2%x (number years of lease -1) x Premium paid

The other part is treated as rent paid in advance

Less: Capital element (X) Rent paid in advance X Allowable over the period of the lease

Example 7 – Tag Ltd

On 1 October 2012, Tag Ltd paid a premium of £45,000, to acquire the 21 year lease of a warehouse for use in its trade Tag Ltd prepares statements of profit or loss to 30 September each year

Required:

Advise Tag Ltd of the corporation tax implications of the payment made to the owner of the warehouse in respect of the lease

Capital allowances on plant and machinery

Capital allowances can be claimed if a company owns plant and machinery

Case law interpretation of plant and machinery

Functional test assets used in the business as opposed to the setting in which the business is carried out Plant comprises of goods or chattels kept for the permanent employment in the business

Apparatus of trade

Qualifying as plant – Capital allowances given as per case law

- Swimming pool installed by owners of a caravan park

- The law books of a barrister

- Moveable office partitioning

- Light fittings, décor and murals of a hotel and pub business

- Free-standing screens used in a window display by building society

Setting

Not qualifying as plant – No capital allowances given as per case law

- Laboratory and gymnasium of a school

- Canopy over petrol station

- Ship used as a floating restaurant

- Football club’s spectator stand

- False ceiling containing conduits, ducts and lighting apparatus

- Lighting in department store

Exceptions treated as plant

Qualifying as plant as per case law

- Fire regulation expenditure

- Thermal insulation of industrial building

- Sports ground safety requirement expenditure

- Expenditure on a security asset, such as alarms, bullet proof windows to improve personal security of those under special threat, e.g from terrorists

Qualifying as plant

- Computer, telecommunication and surveillance systems, including wiring, etc

- Safes and burglar alarm systems

- Advertising hoardings, signs and displays, etc

- Display equipment, counters and checkouts

- Lifts and escalators

- Space/water heating, ventilation and air conditioning systems

- Electric, cold water, gas and sewerage systems which are specific to trade requirements or connected with specific trade plant items

- Any machinery and expenditure on altering buildings to accommodate plant or machinery which qualifies for capital allowances

Categories of plant and machinery

asset Special Rate Pool

A special rate pool has been introduced with a WDA rate of 8% This special rate pool is for expenditure on motor cars with a CO2 emission > 130 grams per kilometre on long life assets and on plant and machinery integral to a building A number of items of plant and machinery are treated as integral to a building, particularly: electrical and lighting systems, cold water systems, space or water heating systems, powered systems of ventilation, cooling, or air purification, lifts and escalators

Short life assets

A trader may elect that an asset other than a motor car should be treated as a short life asset Such an election has the following consequences

● The asset is treated as non pooled and the election is technically known as a depooling election

● If the asset is not disposed of within eight years from the end of the accounting period in which it is acquired, it joins the main pool at its tax written down value and the depooling election will have no effect

● If the short life asset is disposed of within the eight year period a balancing allowance or balancing charge will arise in the accounting period in which it is disposed of