Geranium plc (Geranium) prepares accounts to 31 March. During the year ended 31 March 2021 the following transactions took place:

10 May 2020 Purchased a car, with emissions of 123g/km of C02, for £13,000.

26 May 2020 Sold an asset from the special rate pool for £650. It was originally acquired at a cost of £6,000.

3 July 2020 Purchased heat pumps for £3,000. These qualify for enhanced capital allowances.

19 July 2020 Purchased office furniture for £30,000.

8 August 2020 Sold an asset from the main rate pool for £2,025. It was originally acquired at a cost of £1,900.

11 August 2020 Purchased equipment for £12,000.

14 August 2020 Purchased a car, with emissions of 141 g/km, for £30,500.

22 December 2020 Purchased a car, which emits 136g/km of C02, for £38,000 for the sales director. It is expected there will be 20% private use of this car by the sales director.

5 January 20201 Purchased factory machinery for £86,500. 5 March 2021 Purchased a car, with emissions of 47 g/km, for £28,200.

The brought forward balances of the capital allowance pools at the start of the year were:

Main pool: £36,000

Special rate pool: £5,400

Required:

a) Calculate the maximum capital allowances available to Geranium plc for the year ended 31 March 2021. Show all workings in the relevant capital allowances pools and show the tax written down value carried forward figures (if any) for each pool.

b) Explain what action Geranium plc could have taken to increase the maximum capital allowances for the period.

CAPITAL GAINS TAX (CGT) (2020/21)

Standard rate of CGT 10%*

Higher rate of CGT 20%*

Business asset disposal relief rate 10%

Annual exemption £12,300 *

An 8% surcharge applies in respect of residential properties.

Answer rating: 100% (QA)

a Assume that the cars purchased on 10 May 2020 8 August 2020 and 22 December 2020 are disposed of a... View the full answer