ACCA Taxation (F6) Practice Exam

Should private use by employees be considered when calculating capital allowances for individuals?

1. Yes, it should be fully accounted for

2. No, it should not be considered

3. Yes, but only partially

4. No, unless specified otherwise

The correct answer is: No, it should not be considered

When calculating capital allowances for individuals, private use by employees is not considered. Capital allowances are deductions allowed for the depreciation of business assets, and they should reflect only the costs incurred for business purposes. When an asset is used privately, it does not contribute to the income-generating activities of the business, and therefore it should not be factored into the calculations for capital allowances. In the context of tax calculations, private use can distort the actual value of allowances if included since these allowances are designed to reflect the investment in business assets. Excluding private use ensures that only the proportion of the asset utilized for business purposes is accounted, preventing any undue tax advantages from being realized. The other options suggest varying degrees of inclusion of private use, which would complicate the calculation process and potentially lead to inaccuracies in tax reporting. Only assets used wholly or in part for business purposes are eligible for capital allowances, with the understanding that private use must be segregated from business considerations.