ACCA Taxation (F6) Practice Exam

In which scenario would WDA not be applicable?

1. When the asset is part of a small pool

2. When no assets were disposed of

3. When the asset is disposed of before any depreciation is claimed

4. When assets exceed their pool limit

The correct answer is: When the asset is disposed of before any depreciation is claimed

Wasting Assets Relief (WDA) is a tax relief available for the depreciation of certain types of capital assets in a business. The applicability of WDA can be influenced by the circumstances surrounding the asset, particularly concerning its disposal. In the scenario where an asset is disposed of before any depreciation is claimed, WDA would not be applicable. This is because WDA is designed to allow businesses to claim tax relief on the depreciation of qualifying assets over their useful lives. If an asset is sold or otherwise disposed of prior to claiming any WDA, the business does not have an opportunity to account for any depreciation benefits, as the asset is no longer in use. Essentially, once disposal occurs, the asset is removed from the pool of assets used for WDA calculations, and since no depreciation was claimed before the disposal, there are no allowances left to claim. This situation highlights the principle that WDA is tied directly to the ownership and usage period of an asset within a business's operations. If the asset has been disposed of at the onset, there is no qualifying expenditure left to amortize for tax purposes. In contrast, the other scenarios involve situations where WDA could still potentially be claimed or affect the calculation of allowances. For example, assets in a