Capital allowances in cessation period of a sole trader

I m trying to calculate the capital allowances for a sole trader  during the final cessation period- his final period of cessation is a long accounting period (more than 12 months). 

Normally, in the final accounting period, you calculate Balancing Allowances or Balancing charges and NO Written Down Allowances, NO Annual Investment Allowances. 

BUT this a long period of account. 

DO I SEPARATE THIS INTO 12 MONTHS FIRST AND THEN THE REST (and incorporate WDA, AIA in 12 month period AND Balancing Allowances or Balancing Charges ONLY in latter period of less than 12 months?)

Thanks in advance!

  • I note that your client is as a sole trader and therefore the capital allowance basis/chargeable period will be the whole final period of account.  However you do not say how long the period of account will be.  For income tax purposes a capital allowance chargeable period can never be longer than 18 months.  So for example if your final period of account is 15 months long then the chargeable period will be 15 months long.  If the chargeable period is 20 months long then there will be 2 chargeable periods, the first of 12 months and the second of 8 months. 
     
    If there are 2 capital allowance chargeable period in respect of the accounts then the first should be treated as like any other chargeable period and have additions, disposals, AIA and WDA as applicable.  For the final chargeable period you are correct when you say you calculate Balancing Allowances or Balancing Charges and NO Written Down Allowances and also remember to include in period additions and disposals.  However strictly you can claim Annual Investment Allowances but as the overall claim for the chargeable period will be the same whether you do or don’t there seems to be no point in doing so.
     
    Note that only companies have basis periods restricted to a maximum 12 months in length in all situations. 
  • Thank you for your comment! the final period is 20 months, so my understanding is that this should be divided into 2 periods (12 months + 8 months), correct?

    the rest is clear to me, i.e. in 12 months you get WDA, AIA and in 8 months you only get Balancing Charges or Balancing Allowances