ExpertEasy2 marksMultiple Choice
ACCA · Question 09 · Corporation tax liabilities
Section A: Objective Test
Omega Manufacturing Ltd prepares accounts to 30 September each year. During the year ended 30 September 2023, the company purchased a new ventilation system for its factory for £150,000. This qualifies as an integral feature. What is the maximum capital allowance Omega Manufacturing Ltd can claim on this expenditure in the year ended 30 September 2023?
Section A: Objective Test
Omega Manufacturing Ltd prepares accounts to 30 September each year. During the year ended 30 September 2023, the company purchased a new ventilation system for its factory for £150,000. This qualifies as an integral feature. What is the maximum capital allowance Omega Manufacturing Ltd can claim on this expenditure in the year ended 30 September 2023?
Answer options:
A.
£9,000
B.
£27,000
C.
£75,000
D.
£150,000
How to approach this question
Identify the type of asset (integral feature = special rate pool). Check the AIA limit (£1,000,000). Since the expenditure (£150,000) is well within the AIA limit, the company can claim 100% AIA on it to maximize allowances.
Full Answer
D.£150,000✓ Correct
Integral features belong in the special rate pool (normally 6% WDA). However, a company should always allocate its Annual Investment Allowance (AIA) to special rate pool additions first to maximize tax relief. The AIA limit is £1,000,000 per 12-month period. Since £150,000 is below this limit, the entire amount can be claimed as AIA, giving a capital allowance of £150,000.
Common mistakes
Applying the 6% WDA or 50% FYA without realizing that AIA provides a 100% deduction and is more beneficial.
Practice the full ACCA TX — Taxation Practice Exam 5
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