Test your understanding: answers

(1).

Statement A is false.
Expenditure paid for or incurred in the seven years prior to the commencement of trade is treated as having been paid for or incurred on the first day of trading.

Statement B is true.

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