How to use FreeAgent’s comprehensive capital allowances calculation

This article explains how customers with UK limited company accounts can make use of FreeAgent’s comprehensive capital allowances calculation.

What the comprehensive capital allowances calculation involves

UK limited company accounts

FreeAgent’s comprehensive capital allowances calculation is available for assets purchased within an accounting year ending on or after 23rd July 2020. It works by inviting you to identify capital assets that qualify for either:

• annual investment allowance 
• first year allowances
• allocation to the main rate or special rate pool for writing down allowances

FreeAgent is then able to generate a sophisticated capital allowances calculation in the Corporation Tax area of your account. It is also able to automatically calculate any balancing charges that are due if you dispose of an asset.

Assets purchased within an accounting year ending before 23rd July 2020 will continue to be treated by FreeAgent as 100% allowable for tax. As a result, a more basic calculation will be available to view in the Corporation Tax area of your FreeAgent account. 

UK sole trader, partnership and limited liability partnership (LLP) accounts

For customers with UK sole trader, partnership and LLP accounts, FreeAgent’s capital allowances support will not change. FreeAgent will continue to automatically treat capital assets as 100% allowable in your Self Assessment tax calculations.

How to make use of the comprehensive capital allowance calculation

Selecting a tax treatment

If you have a UK limited company account, follow the steps outlined below to apply FreeAgent’s comprehensive capital allowances calculation to any asset purchased within an accounting year ending on or after 23rd July 2020.

• Navigate to the ‘Accounting’ tab at the top of the screen and select ‘Reports’. Choose ‘Capital Assets’ from the ‘Breakdown’ area. 
• Select the asset in question and choose ‘Edit tax treatment’ from the box displayed to the right of the asset timeline.

• Select the relevant tax treatment for the asset. If you’re not sure which tax treatment to select, read HMRC’s guide on capital allowances or speak to your accountant. If you’re not currently working with an accountant, you might want to take a look at FreeAgent’s CoPilot programme.

Viewing the tax treatment and calculation

Once you’ve selected the appropriate tax treatment, you can view how it has been claimed in the asset’s timeline.

Annual investment allowance and first year allowances will show on the timeline against the date on which you purchased the capital asset. Writing down allowances, small pool allowance adjustments and balancing charge adjustments show on the final day of your current Corporation Tax period.

The ‘Capital Allowances’ section of your Corporation Tax forecast in FreeAgent will reflect the tax treatments that have been applied.