Capital allowances are applicable to which of the following?

Capital allowances are a tax relief mechanism that allows businesses to deduct the cost of certain capital assets over time. These deductions provide tax relief for the purchase of physical assets that are used in the business's operations.

The correct choice focuses on the fact that capital allowances primarily apply to tangible fixed assets such as plant and machinery. These assets are essential for business operations, and their depreciation can greatly impact the taxable income of a business. When a company purchases machinery, vehicles, or equipment, it can claim capital allowances on these items, which helps to reduce the overall tax burden.

In contrast, other types of assets like real estate and financial investments do not typically qualify for capital allowances in the same way. Real estate—while associated with depreciation for accounting purposes—often falls under different tax treatments, such as capital gains tax when sold. Similarly, financial investments are usually treated as capital assets with different taxation rules.

Focusing on plant and machinery as eligible for capital allowances recognizes their vital role in production and operational efficiency, making the correct option relevant to tax practice in a business context.