ACCA Taxation (F6) Practice Exam

Do buildings qualify for capital allowances?

1. Yes, they qualify for full capital allowances

2. No, they use structures and buildings allowance

3. Yes, only for a limited period

4. No, they are exempt from all allowances

The correct answer is: No, they use structures and buildings allowance

Buildings do not qualify for full capital allowances as other types of capital assets do. Instead, they are treated under a specific provision known as the Structures and Buildings Allowance (SBA). The SBA allows businesses to claim a deduction for the costs incurred in constructing or renovating non-residential buildings. This allowance recognizes that buildings have a long-term useful life and depreciation is spread over a defined period—typically 33 1/3 years in the UK. The concept behind the Structures and Buildings Allowance ensures that businesses can recoup some of their investment over time through tax relief. This is distinct from the general capital allowances available for movable assets such as machinery and vehicles, which may qualify for enhanced capital allowances. In contrast, the other options present alternatives that misunderstand how buildings are treated for tax purposes or inaccurately represent the allowances available. Buildings are not exempt from all allowances, nor do they qualify for full capital allowances or only for a limited period. This understanding of the SBA is crucial for accurate tax planning and compliance.