ACCA Taxation (F6) Practice Exam

What is the rule regarding claiming AIA, FYA, and WDA in the final accounting period?

1. All can be claimed without limitations

2. AIA can be claimed only

3. None can be claimed

4. All can be claimed with a cap

The correct answer is: None can be claimed

In the context of capital allowances, when a business reaches its final accounting period, specific rules apply regarding the claimable allowances, including the Annual Investment Allowance (AIA), First Year Allowance (FYA), and Writing Down Allowance (WDA). During the final accounting period, the AIA can only be claimed on qualifying expenditure incurred up to the end of that period. However, if the business is ceasing operations, the ability to claim AIA may be affected. For the FYA and WDA, there are restrictions that can apply based on the nature and timing of the acquisitions. The ruling on AIA, FYA, and WDA, being constrained in a final accounting period, often means that businesses may not be able to claim these allowances as they typically would in a period where they are continuing operations. Therefore, the correct answer reflects the understanding that, under these circumstances, none of the allowances can be claimed, as the conditions for doing so are not met due to the closing of the business. This understanding is crucial in tax planning, especially when preparing for the closing of a business, as it impacts the overall tax liabilities and potentials for reducing taxable profits.