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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: property and investment income

Marcus, a higher rate taxpayer, lets a furnished flat and also owns a separate commercial warehouse used in his own trade as a sole trader. Which statement about capital allowances on these assets is correct?

Marcus can claim the annual investment allowance on plant used in his trade, but not on furniture in a residential furnished letting. Items in a dwelling house do not qualify for capital allowances. The other options misstate the 3% structures rate or give company-only first year allowances to an individual.

  1. AMarcus can claim the annual investment allowance on plant for the furnished flat, as it is a property business
  2. BMarcus can claim the annual investment allowance on plant used in his trade, but not on furniture in a residential furnished lettingCorrect
  3. CMarcus can claim the structures and buildings allowance on the flat at 6%
  4. DMarcus can claim a 100% first year allowance on plant in the trade because he is a higher rate taxpayer

Explanation

The AIA is available on plant and machinery used in the trade, so Marcus can claim it there. Furniture and similar items in a residential dwelling do not qualify for capital allowances, as relief for these is under replacement of domestic items relief. The structures and buildings allowance is 3%, not 6%, and first year allowances are for companies.

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