ACA Principles of Tax 2025 – 400 Free Practice Questions to Pass the Exam

The correct statement regarding allowable payments for plant and machinery is that payments for plant and machinery are generally allowable. This reflects a fundamental principle in accounting and taxation where capital expenditures, such as those for plant and machinery, can often be categorized as allowable expenses. Such expenditures contribute to the operational capacity or extend the useful life of the assets involved.

In practice, this means that businesses can deduct these expenses from their taxable income, enabling them to reduce their overall tax liability. Capital allowances or depreciation are commonly applied to such expenditures, allowing businesses to spread the cost of the assets over their useful lives, thereby providing tax relief.

In contrast, the other statements are either too limiting or incorrect. For instance, saying "only cars can be included" ignores the wide variety of machinery and equipment that businesses may invest in. Identifying "all other machinery expenses are allowable" fails to specify what conditions might limit the deductibility of certain expenses. Lastly, suggesting that "only repairs are allowable" misrepresents the broader scope of expenses that can be recognized in relation to plant and machinery. Thus, understanding that payments for plant and machinery, in a general sense, are allowable gives a clearer picture of how tax treatment applies in these scenarios.