ExpertMedium2 marksMultiple Choice
ACCA · Question 29 · Corporation tax liabilities
Section B - Case 3: Titanium Forging PLC
Titanium Forging PLC is a heavy manufacturing company. It recently changed its accounting date, resulting in a 15-month period of account from 1 January 2023 to 31 March 2024.
The company constructed a new factory building. The total cost was £3,000,000, which included £500,000 for the land. The factory was brought into use on 1 July 2023. What is the Structures and Buildings Allowance (SBA) available for the 12-month accounting period ended 31 December 2023?
Section B - Case 3: Titanium Forging PLC
Titanium Forging PLC is a heavy manufacturing company. It recently changed its accounting date, resulting in a 15-month period of account from 1 January 2023 to 31 March 2024.
The company constructed a new factory building. The total cost was £3,000,000, which included £500,000 for the land. The factory was brought into use on 1 July 2023. What is the Structures and Buildings Allowance (SBA) available for the 12-month accounting period ended 31 December 2023?
Answer options:
A.
£75,000
B.
£90,000
C.
£37,500
D.
£45,000
How to approach this question
Deduct land cost to find qualifying expenditure. Apply the 3% SBA rate. Pro-rate the allowance from the date the building is brought into use to the end of the accounting period.
Full Answer
C.£37,500✓ Correct
The cost of land (£500,000) must be excluded, leaving qualifying expenditure of £2,500,000. The SBA rate is 3% per annum. The full year allowance is £2,500,000 x 3% = £75,000. Because the factory was brought into use on 1 July 2023, the allowance must be pro-rated for the 6 months to 31 December 2023. £75,000 x 6/12 = £37,500.
Common mistakes
Including the land cost, or forgetting to pro-rate the allowance from the date of first use.
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