What is true regarding capital allowances on purchased buildings under the cash basis?

Capital allowances relate to the tax relief available for the depreciation of tangible fixed assets, such as buildings, used in a business. When operating under the cash basis for taxation, the treatment of capital allowances differs significantly from more traditional accounting methods.

In the context of the cash basis, capital expenditures, including the purchase price of buildings, do not directly impact the taxable income calculations in the same way as under the accrual basis. This means that while you can claim certain types of expenditures as allowable deductions when operating under the accrual basis, capital expenditures such as those for buildings are treated differently here.

Specifically, capital allowances are not considered allowable when calculating taxable income under the cash basis, because these capital costs cannot be deducted in the year of purchase. Instead, the business would recognize income based on actual cash received and expenses when they are actually paid. Therefore, any capital allowances related to buildings are not recognized within the taxable receipts or as deductions from profits, leading to the conclusion that they are not considered allowable in this context.

Consequently, this aligns with why the answer stated is true: they are simply not included in the allowable expenses that a business can claim under the cash basis.