ACCA Advanced Taxation (ATX) Practice Exam

For qualifying loan interest, how long is relief available when the loan is for plant/machinery in a partnership?

1. Only in the year of purchase

2. For the year of purchase and the next two years

3. For the year of purchase and the next three years

4. For five years after the purchase

The correct answer is: For the year of purchase and the next three years

Relief for qualifying loan interest on a loan taken out for the purchase of plant or machinery in a partnership is available for the year of purchase and the following three years. This means that the total duration of relief is four years, encompassing the year in which the asset is bought and the three subsequent years thereafter. The rationale behind this is to support businesses in their investments in capital assets by allowing them to deduct loan interest payments over a manageable timeframe. This can significantly ease financial pressures during the early years following the acquisition of such capital-intensive assets, thus encouraging investment in growth and operational efficiency. Given this context, the correct duration for the relief—four years in total—aligns neatly with the answer provided. Other options either understate the period of support or extend it unnecessarily, which does not align with the established regulations regarding qualifying loan interest relief for plant or machinery in partnerships.