ACCA Taxation (F6) Practice Exam

What is the structure and buildings allowance?

1. Annual straight line allowance of 5% over 20 years

2. Annual straight line allowance of 3% over 33 years and 4 months

3. Annual straight line allowance of 2% over 25 years

4. Annual straight line allowance of 4% over 30 years

The correct answer is: Annual straight line allowance of 3% over 33 years and 4 months

The structure and buildings allowance is a tax relief offered to encourage investment in commercial property and construction. It allows businesses to claim a deduction based on the capital expenditure incurred on eligible structures and buildings. The correct allowance is an annual straight-line deduction of 3% over a period of 33 years and 4 months. This structure allows businesses to calculate a consistent annual deduction against their taxable profits, effectively spreading the tax relief over the lifetime of the asset. This approach acknowledges the long-term nature of investments in buildings and provides businesses with a structured way to recover the costs associated with these capital investments. The specific timeframe of 33 years and 4 months enables the allowance to account for the actual economic life of modern buildings more accurately. By offering a longer period and a specific percentage, it aligns the tax relief with the depreciation of the asset and helps businesses manage their cash flows effectively over many years. This allowance incentivizes businesses to invest in necessary infrastructure, which can contribute to economic growth and development while providing them with a predictable financial advantage in their tax calculations.