Question 1

Section B: Case 1 - Vanguard Robotics

Scenario: Vanguard Robotics was run as a sole trade by Liam, developing specialized robotic arms for manufacturing. Liam prepared accounts to 31 December each year. On 30 September 2023, Liam ceased trading as a sole trader and transferred the entire business as a going concern to a newly formed company, Vanguard Robotics Ltd, in exchange for shares.

Question: Prior to incorporation, Liam purchased £1.5 million of new robotic testing equipment in May 2023. What is the maximum Annual Investment Allowance (AIA) Liam can claim on this expenditure for his final 9-month period of account?

Accepted Answer

Recall the specific rules for capital allowances in a period of cessation. Are Annual Investment Allowances (AIA) or Writing Down Allowances (WDA) available in the final period?

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Pro-rating the £1,000,000 limit to £750,000, forgetting that AIA is entirely denied in the period of cessation.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA TX — Taxation Practice Exam 1

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