CAT / FIA FTX Syllabus B. Adjusted Profit / Loss Computations - CA on commencement and cessation - summary - Notes ^{2 / 2}

Commencement

• Capital allowances are calculated for each year.

• Consider the length of the period of account - may not be 12 months.

• Annual Investment Allowance may be available.

• Assets brought into the business by a sole trader are treated as acquired at market value.

See more in Topic: Capital Allowances

Cessation of trade

• For plant and machinery, when a business ceases to trade, no AlAs or WDAs are given in the final year.

• No allowances are available in the final year on the cessation of a business.

  Balancing allowances or balancing charges may arise.

Each asset is deemed to be disposed of on the date the trade ceased

Additions in the relevant period are brought in.

The disposal proceeds are deducted from the balance remaining in the pool.

If the proceeds exceed the balance then a balancing charge arises. 

If the balance exceeds the proceeds then a balancing allowance is given.