ExpertMedium2 marksMultiple Choice
ACCA · Question 13 · Income tax and NIC liabilities
Section A: Objective Test
Fiona lets out a fully furnished residential property. During the tax year, she replaced an old washing machine (original cost £300) with a new, upgraded washer-dryer costing £600. A standard replacement washing machine would have cost £400. She paid £50 to dispose of the old machine. What is the allowable deduction for Replacement of Domestic Items Relief?
Section A: Objective Test
Fiona lets out a fully furnished residential property. During the tax year, she replaced an old washing machine (original cost £300) with a new, upgraded washer-dryer costing £600. A standard replacement washing machine would have cost £400. She paid £50 to dispose of the old machine. What is the allowable deduction for Replacement of Domestic Items Relief?
Answer options:
A.
£650
B.
£450
C.
£400
D.
£350
How to approach this question
Apply the Replacement of Domestic Items Relief rules. The relief is limited to the cost of a like-for-like replacement. Add any incidental costs of disposing of the old item. Deduct any proceeds from selling the old item (none here).
Full Answer
B.£450✓ Correct
Under the Replacement of Domestic Items Relief, the allowable deduction is restricted to the cost of a modern equivalent (like-for-like) replacement, plus any costs of disposing of the old item, less any proceeds from the old item. The cost of the equivalent replacement is £400. The disposal cost is £50. The upgrade element (£200) is not allowable. Total allowable deduction = £400 + £50 = £450.
Common mistakes
Claiming the full cost of the upgraded item (£600).
Practice the full ACCA TX — Taxation Practice Exam 5
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