Test your understanding: answers
Statement A is false.
Expenditure incurred in the seven years prior to the commencement of trade is treated as having been incurred on the first day of trading.
Statement B is true.
(i) Business is unincorporated
The annual investment allowance will be increased to £312,500 (£250,000 x 15/12). Accordingly, the capital allowances for the 15-month period will be 100% of the cost incurred of £120,000.
(ii) Business is a company
For a company, the 15-month period of account ending on 30 September 2014 must be split into two accounting periods: one for the first 12 months ending on 30 June 2014 and the other for the remaining three months ending on 30 September 2014. The machinery purchased on 1 September 2014 falls into the second accounting period.