Skip to content

ACCA Applied Skills · Taxation (UK) · Taxable total profits

Ember Ltd has a main pool tax written down value of £12,000 brought forward. During the 12-month period it sold a machine for £15,000 (original cost £18,000) and bought nothing. The pool is the only pool. What is the balancing adjustment or allowance for the period?

There is a balancing charge of £3,000. The £15,000 disposal proceeds exceed the £12,000 pool value, leaving a negative balance of £3,000, which is added to taxable trading profit as a balancing charge.

  1. AWriting down allowance of £540
  2. BBalancing charge of £3,000Correct
  3. CWriting down allowance of £0 and pool carried forward of £0
  4. DBalancing allowance of £3,000

Explanation

Disposal proceeds are deducted from the pool, with a limit of original cost. The proceeds of £15,000 are below the cost of £18,000, so £15,000 is deducted. £12,000 less £15,000 gives a negative pool of £3,000, which is a balancing charge, as there is no writing down allowance on a negative balance. A balancing allowance would arise only if the pool were positive and the company ceased trading.

Did you get it right without looking?

One question tells you little. A timed set on Taxable total profits shows your real accuracy, how long you take and where you lose marks.

Practise Taxable total profitsFree diagnostic mock

More Taxable total profits questions