Company purchased £40,000 machinery on 6th April 2018 with a useful economic life of 4 years and has taxable profits for the year to 5th April 2019 of £100,000. The £40,000 will be eligible for the annual investment allowance:
Capital allowances pool
Additions (machinery purchased 1 April) £40,000
Annual Investment Allowance (£40,000)
Balance carried forward £nil
Tax computation
Taxable profits £100,000
Add: Depreciation £10,000*
Less: Capital allowances (£40,000)
Profits chargeable to Corporation Tax £70,000
Corporation Tax @ 20% £14,000
* Depreciation has been calculated by spreading the purchase price over the useful economic life (£40,000 / 4 = £10,000 per year).
Company purchased a car in the previous year which has a depreciation charge of £15,000 per year and has a capital allowance pool brought forward of £6,000. CO2 emissions for the vehicle were 150g/km.
Capital allowances pool
Balance brought forward £6,000
Writing Down Allowance @ 18% (£1,080)
Balance carried forward £4,920
Tax computation
Taxable profits £100,000
Add: Depreciation £15,000
Less: Capital allowances (£1,080)
Profits chargeable to Corporation Tax £113,920
