Taxation of the unincorporated business for ATX (UK) - part 4: self-test answers

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.


Business is unincorporated
The annual investment allowance will be increased to £1,250,000 (£1,000,000 x 15/12). Accordingly, the capital allowances for the 15-month period will be 100% of the cost incurred of £310,000.

(ii) Business is a company
For a company, the 15-month period of account ending on 30 September 2022 must be split into two accounting periods: one for the first 12 months ending on 30 June 2022 and the other for the remaining three months ending on 30 September 2022. The machinery purchased on 1 September 2022 falls into the second accounting period.

The machinery will qualify for a 130% first year allowance of £403,000 (£310,000 x 130%). This is because it is to be purchased in the two-year period commencing 1 April 2021.