ACT505 Chap.6 Depreciation Allowance Schedules
Depreciation Allowance Schedules
Build an asset register before the pools
The exercises combine opening tax written-down values, additions, hire-purchase terms, installation costs, disposals, private use and dates when assets become available.
Record each asset's date, description, rate pool, qualifying cost, business proportion and disposal amount before rolling any pool forward.
Keep accounting and tax values apart
Begin each schedule with tax pool values, not financial-statement depreciation or net book value. Add qualifying expenditure, account for disposal effects, calculate the allowance and reconcile the closing pool.
Where a separate asset requires a balancing adjustment, isolate its tax history rather than reading the accounting gain or loss as the tax answer.
Stage additions and disposals separately
Do not place every number immediately into a pool. First decide whether the item is an asset, whether its cost belongs in the tax schedule, when it became available for use and whether only a business-use proportion enters.
For hire purchase, separate the asset price from financing facts before applying the course method. For a disposal, identify the asset, the relevant pool or separate history, the disposal proceeds supplied and any private-use restriction.
This staging prevents the same purchase or disposal from affecting two rows.
Use a roll-forward that can be audited
A strong schedule reads from left to right: opening tax value, qualifying additions, disposal effect, allowance, then closing tax value. Label the rate and basis beside each calculation rather than leaving an unexplained percentage in the arithmetic.
Cross-cast the rows and reconcile opening plus movements to closing. If the question later asks for assessable profits, transfer only the tax allowance total, not the closing pool or accounting depreciation.
Read dates as computational facts
The source exercises deliberately include acquisition, use and disposal dates. Put these into the register before choosing a treatment.
A date can determine the relevant year, whether the asset was available, and which movement belongs in the current roll-forward. If the facts do not establish a necessary condition, state the assumption instead of silently inventing one. The result should be a schedule whose inputs, restrictions and transfer point are visible to a marker.
What this chapter covers
- 01
Opening tax written-down pools
- 02
Qualifying asset additions
- 03
Hire purchase cash price and finance
- 04
Private-use adjustment
- 05
Disposal and balancing adjustment
- 06
Allowance and closing pool reconciliation
Worked example · free
Reconcile one pool from opening to close
- 3Reconcile the pre-allowance pool.
- 2Apply the pool rate to the permitted base.
- 3Carry forward and check the closing value.
Key terms
- Tax Written Down Value
- The remaining tax value of a pool or asset after allowances and disposal effects.
- Qualifying Cost
- The permitted asset cost entering the depreciation-allowance calculation after relevant restrictions.
- Hire Purchase
- An acquisition arrangement requiring separation of cash price, finance charges, payment timing and use date.
- Balancing Adjustment
- An asset-specific tax adjustment arising from comparison of tax history and disposal value where applicable.
- Closing Pool
- The tax value carried forward after movements and the current allowance are reconciled.
Depreciation Allowance Schedules FAQ
Why not use accounting depreciation?
The tax computation uses depreciation allowances and tax written-down values. Accounting depreciation may be reversed in profits tax, but it does not replace the tax pool schedule. Begin from the opening tax values supplied, classify each addition and disposal, and keep any private-use restriction visible. The resulting allowance is the figure that transfers into the profits-tax adjustment.
Accounting net book value may help explain the accounts, but substituting it for a tax pool breaks both the roll-forward and the closing reconciliation.
What facts matter for hire purchase?
Separate cash price from finance charges, record deposit and instalment information, and identify when the asset became available for business use before entering a pool.
How do I catch a doubled disposal?
Reconcile the pre-allowance pool from opening value, additions and disposal effects, then reconcile the close after the allowance. A duplicated disposal breaks one of those bridges.
Exam move
Make an asset register before every pool question. Highlight dates, cash price, finance elements, use, private proportion and disposal value in different columns. Then roll each pool from opening to close and cross-reference the total allowance into profits tax. Never let a financial-statement net book value enter without a tax rule.
Practise by covering the answer and rebuilding only the register first; if the register is wrong, repair classification before doing arithmetic. On review, tick each asset once at entry and once at disposal, circle every private-use restriction, and confirm that the figure transferred to profits tax is the allowance total.
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