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HMRC internal manual

Capital Allowances Manual

PMA: WDA & balancing adjustments: WDAs for small pools

CAA01/S56A

This new type of WDA for small pools was introduced by FA08 and applies to the main pool and the special rate pool. It does not apply to single asset pools.

Where the total amount of a person’s qualifying expenditure (in the pool, or to be added to the pool), minus the total of any disposal receipts for the chargeable period - call this amount £x - is less than or equal to the ‘small pool limit’ of £1,000, the person is entitled to a WDA of that amount (that is, of £x). A person may either claim the small pools WDA (if the amount in the pool does not exceed the limit) or the normal percentage WDA. He cannot claim both WDAs in respect of the same pool in the same chargeable period.

If, in one year, £x were, for example, £1,200, then the person would be unable to claim the ‘small pools’ allowance that year. Instead, he could claim (say) a normal WDA of 18% = £216 , leaving a balance of £984 to be carried forward to the next chargeable period. And, if for example, he incurred no new expenditure and made no disposals in the next chargeable period, he would be able to claim a small pools allowance of £984 then.

The taxpayer may claim less than the full amount of the small pools WDA.

Example 1

Jim has a plumbing business. In his 2009-10 chargeable period, Jim carries forward a balance of £900 in his main pool of P&M expenditure from the previous year. He spends £55,000 on two new vans and some new tools and sells his old van for £5,000. for 2009-10, Jim is entitled to claim both a £50,000 AIA and £900 ‘small pools’ allowance, as follows:

 

Main pool balance carried forward                         £900

Add: New expenditure van & tools                        £55,000

Deduct AIA                                                         (£50,000)

Deduct Proceeds from Sale                                  (£5,000)

Residue unrelieved                                              £900

Less Small Pool WDA                                           (£900)

Balance                                                              Nil

 

Example 2

Mary is a famous pianist. In 2010-11 she buys a concert grand piano for £51,000 for her practice studio. She incurs no other expenditure and makes no disposals in that period. She allocates the expenditure to her ‘special rate’ pool because she expects to use the piano for more than 25 years in her profession. She claims both a £50,000 AIA and £1,000 small pool WDA for 2010-11, leaving a nil balance of expenditure to carry forward.