Test your understanding: answers

(1).

Statement A is false.
Expenditure incurred in the seven years prior to the commencement of trade is treated as having been incurred on the first day of trading.

Statement B is true.

(2). The annual investment allowance will be increased to £1,250,000 (£1,000,000 x 15/12) to reflect the length of the trading period. Accordingly, the capital allowances for the 15-month period will be 100% of the cost incurred of £1,100,000.