ACCA Taxation (F6) Practice Exam

Is structures and buildings allowance given on subsequent improvements?

1. No, it is only applicable to the initial cost

2. Yes, for any improvements made later

3. Only if the improvements exceed a certain limit

4. No, it only applies to residential buildings

The correct answer is: Yes, for any improvements made later

The structures and buildings allowance does indeed apply to improvements made after the initial construction. This allowance is designed to provide tax relief for the capital expenditure incurred on qualifying structures and buildings, which can include subsequent improvements or enhancements that increase the value or usability of the property. This allowance encourages businesses to invest in their properties, recognizing that improvements can lead to better operational efficiencies or increased value over time. As such, businesses can claim deductions on these costs over a specified period, reflecting the ongoing investment in their premises. The other options do not align with the provisions of the allowance. The notion that it only applies to the initial cost disregards the tax incentive intended for ongoing improvements, while the idea that there is a limit on improvements for claiming this allowance is misleading; it is the nature of the expense and its relation to qualifying criteria that matter rather than a specific threshold. Lastly, stating that the allowance is restricted to residential buildings is incorrect, as it applies to a broader range of structures, not just those that are residential.