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Free Questions › ACCA › Advanced Taxation
Free ACCA Advanced Taxation Practice Questions & Answers
400 exam-style Advanced Taxation questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 301
The normal expenditure out of income exemption for IHT allows gifts to be exempt if:
Select an option first.
Correct answer: B — The gift is part of normal expenditure, made from income (not capital), and does not reduce the donor's standard of living
Explanation: B is correct: the normal expenditure out of income exemption (IHTA 1984 s21) requires three conditions: (a) part of normal expenditure (regular, habitual); (b) made from income, not capital; (c) after making the gift, the donor retains sufficient income to maintain their usual standard of living. B correctly describes these conditions. A is wrong — timing is irrelevant. C is wrong — the small gifts exemption (£250) is a different exemption. D is wrong — charities are separately exempt.
Question 302
The small gifts exemption for IHT allows:
Select an option first.
Correct answer: A — Up to £250 per recipient per tax year, with no cumulation
Explanation: A is correct: the small gifts exemption allows any individual to make any number of small gifts of up to £250 per recipient per tax year, completely exempt from IHT. It cannot be combined with the annual exemption for the same recipient. A is correct. B is wrong — it is per recipient, not per donor. C and D are wrong amounts.
Question 303
When an individual makes gifts out of capital to another individual (a PET), the 7-year rule means:
Select an option first.
Correct answer: B — If the donor survives 7 years, the gift is completely exempt from IHT
Explanation: B is correct: PETs become wholly exempt from IHT if the donor survives 7 years from the date of the gift. B is correct. A is wrong — PETs are exempt during lifetime (no charge unless death within 7 years). C is wrong — 7 years, not 3, is required for full exemption. D is wrong — no value limit for the 7-year exemption.
Question 304
Stamp duty on UK company shares is charged at:
Select an option first.
Correct answer: A — 0.5% of the consideration (rounded up to nearest £5)
Explanation: A is correct: stamp duty on the transfer of UK company shares is 0.5% of the consideration, rounded up to the nearest £5. A is correct. B is wrong — 1% is not the rate. C is wrong — stamp duty does apply to share transfers. D is wrong — 0.25% is not the rate.
Question 305
Stamp Duty Reserve Tax (SDRT) applies to:
Select an option first.
Correct answer: B — Electronic (paperless) transfers of UK company shares through CREST, at a rate of 0.5%
Explanation: B is correct: SDRT applies to agreements to transfer UK equities (shares) where the transfer is made through CREST (electronic settlement) — at 0.5% of the consideration. This parallels stamp duty for paper transactions. A is wrong — land uses SDLT. C is wrong — 0.5% is the rate, not 1%. D is wrong — corporate bonds are generally exempt from SDRT.
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Question 306
SDLT on the purchase of a residential property in England valued at £300,000 by a first-time buyer (2024/25) is:
Select an option first.
Correct answer: A — £0 — first-time buyer relief applies (up to £425,000)
Explanation: A is correct: first-time buyer relief applies to the first £425,000 of a residential property purchase by qualifying first-time buyers — no SDLT is payable. The relief applies on purchases up to £625,000. For a £300,000 property, no SDLT is due. A is correct. B, C and D are wrong — no SDLT under first-time buyer relief for this value.
Question 307
For IHT purposes, the death estate includes:
Select an option first.
Correct answer: B — Assets owned outright, trust interests (where the deceased had a qualifying interest in possession), nominated assets, gifts with reservation of benefit and joint property
Explanation: B is correct: the death estate for IHT includes: assets owned in the deceased's sole name; any settled property in which the deceased had a qualifying interest in possession (QIIP); certain nominated assets; assets subject to gifts with reservation of benefit (GWR); the deceased's share of joint property. B captures the breadth. A is wrong — it is not limited to outright ownership. C is wrong — the estate is much broader. D is wrong — pensions are generally outside the estate (pending 2027 changes) and ISAs form part of the estate.
Question 308
A gift with reservation of benefit (GWR) arises when:
Select an option first.
Correct answer: B — The donor gives an asset but continues to benefit from it (e.g. giving away a house but continuing to live in it)
Explanation: B is correct: a GWR arises when the donor purports to give away an asset but retains (or re-assumes) a benefit in the asset. The classic example is giving a home to a child but continuing to live there rent-free. The asset remains in the donor's death estate for IHT. B is correct. A is wrong — charity gifts are exempt. C is wrong — cash gifts with no retained benefit are not GWR. D is wrong — trust establishment is a CLT.
Question 309
The exempt amount for wedding/civil partnership gifts for IHT is:
Select an option first.
Correct answer: D — All of the above — different limits apply to different relationships
Explanation: D is correct: wedding/civil partnership gifts are exempt up to: £5,000 from a parent; £2,500 from a grandparent or remoter ancestor/party to the marriage; £1,000 from any other person. All three are different limits for different relationships. D is correct. A is wrong — it is only the parent limit. B is wrong — £250 is the small gifts exemption, not the wedding limit. C is wrong — the grandparent limit is £2,500, not £3,000.
Question 310
The inter-spouse exemption for IHT applies to a non-UK domiciled spouse receiving assets from a UK-domiciled spouse. The exempt amount is:
Select an option first.
Correct answer: A — £325,000 (one nil rate band equivalent) — though the non-dom spouse may elect to be treated as UK domiciled
Explanation: A is correct: where the recipient spouse is non-UK domiciled, the inter-spouse exemption is limited to £325,000 (one nil rate band amount). The non-UK domiciled spouse can, however, elect to be treated as UK domiciled for IHT purposes, which gives the unlimited exemption but also brings worldwide assets within UK IHT. A is correct. B and C are wrong — these apply to UK-domiciled spouses. D is wrong — £100,000 is not the limit.
Question 311
The IHT charge on a trust at the 10-year anniversary of a discretionary trust is based on:
Select an option first.
Correct answer: B — The value of the trust property above the available NRB, multiplied by 30% of the lifetime rate (6% effective rate)
Explanation: B is correct: the 10-year charge (periodic charge) on a discretionary trust is calculated using the hypothetical lifetime chargeable transfer framework, resulting in an effective maximum rate of 6% (30% × 20% lifetime rate) on the value above the available NRB. B correctly describes the mechanism. A is wrong — 40% is the death rate. C is wrong — discretionary trusts do pay periodic charges. D is wrong — the charge is on capital, not income.
Question 312
Exit charges arise on a discretionary trust when:
Select an option first.
Correct answer: B — Property leaves the trust (e.g. distributed to a beneficiary) between 10-year anniversary charges
Explanation: B is correct: exit charges are proportionate IHT charges that arise when property leaves a relevant property (discretionary) trust between anniversary dates. The rate is proportional to the number of quarters elapsed since the last 10-year anniversary charge. B is correct. A is wrong — income payments do not trigger exit charges. C is wrong — new investments do not trigger exit charges. D is wrong — trustee changes do not affect the exit charge.
Question 313
Capital gains tax on disposal of shares uses which identification rule for 'same-day' acquisitions?
Select an option first.
Correct answer: B — Same-day rule: shares acquired on the same day as disposed are matched first
Explanation: B is correct: under the share matching rules in TCGA 1992, disposals are matched in the following order: (1) acquisitions on the same day; (2) acquisitions in the following 30 days (bed and breakfast rule); (3) shares in the Section 104 pool. B correctly identifies that same-day acquisitions are matched first. A is wrong — FIFO was replaced. C is wrong — LIFO is not used. D is wrong — average cost is the pool mechanism.
Question 314
The '30-day rule' (bed and breakfast) in CGT share matching:
Select an option first.
Correct answer: B — Matches a disposal to shares acquired within 30 days after the disposal, preventing artificial loss creation
Explanation: B is correct: the 30-day rule (TCGA 1992 s106A) requires that if an individual sells shares and reacquires the same shares within 30 days, the disposal is matched to the later acquisition (not the pool). This prevents 'bed and breakfast' transactions (selling to crystallise a loss and buying back the next day). B correctly identifies the anti-avoidance nature. A is wrong — it is re-acquisitions within 30 DAYS AFTER the disposal. C is wrong — the rule prevents this. D is wrong — it is anti-avoidance, not a planning technique.
Question 315
The Section 104 pool for CGT share identification:
Select an option first.
Correct answer: B — Is a pool of shares of the same class in the same company, with a pooled cost — average cost per share is used for disposals from the pool
Explanation: B is correct: the s104 pool aggregates all shares of the same class in the same company acquired before the disposal (excluding same-day and 30-day acquisitions). The pool has a total cost and total number of shares — when shares are disposed of, the appropriate portion of the pool cost is used as the acquisition cost. B is correct. A is wrong — shares are pooled, not held separately. C is wrong — FIFO is not used. D is wrong — bonus issues increase the pool shares (at nil cost) and rights issues affect both pool shares and cost.
Question 316
Capital losses in a tax year must first be:
Select an option first.
Correct answer: B — Set off against capital gains of the same tax year (reducing gains to nil, but not creating a negative position)
Explanation: B is correct: capital losses arising in the current tax year must be set off against current year capital gains — they cannot be carried forward until the current year gains are reduced to nil. If gains exceed losses, the excess gains may be further reduced by the annual exempt amount. B is correct. A is wrong — current year losses must be used in the current year first. C is wrong — capital losses are set against capital gains, not income (trading loss offset against gains is a separate specific relief). D is wrong.
Question 317
A capital loss that exceeds current year gains is:
Select an option first.
Correct answer: B — Carried forward indefinitely and set against capital gains of future years
Explanation: B is correct: capital losses that cannot be relieved in the current year are carried forward indefinitely and set against capital gains of future years, with no time limit. B is correct. A is wrong — losses are not lost. C is wrong — capital losses cannot be converted to income deductions (with limited exceptions for share losses). D is wrong — capital losses cannot be surrendered via group relief.
Question 318
For CGT, a disposal of an asset is deemed to occur at:
Select an option first.
Correct answer: A — The date of exchange of contracts (where an unconditional contract exists)
Explanation: A is correct: for CGT, the disposal date is generally the date of the contract (for unconditional contracts) or the date all conditions are fulfilled (for conditional contracts). This means completion is irrelevant for dating the disposal if an unconditional contract preceded it. A is correct. B is wrong — completion may follow exchange but the disposal date is exchange. C is wrong — payment date is irrelevant. D is wrong — possession date is irrelevant.
Question 319
The CGT exemption for 'wasting assets' applies to:
Select an option first.
Correct answer: A — Any asset with a useful life of less than 50 years that is a tangible moveable asset
Explanation: A is correct: wasting assets (tangible moveable property with a predictable useful life of 50 years or less) are generally exempt from CGT (or the gain is computed differently). Classic examples include animals, boats and certain machinery. A is correct. B is wrong — the asset must be a tangible moveable wasting asset. C is wrong — cars are specifically exempt but the category is broader. D is wrong — quoted investments are not wasting assets.
Question 320
For CGT on the disposal of chattels (tangible moveable property) worth less than £6,000:
Select an option first.
Correct answer: A — The gain is exempt (chattel exemption)
Explanation: A is correct: the chattel exemption exempts gains on disposal of tangible moveable property (chattels) where the proceeds do not exceed £6,000. If proceeds are between £6,000 and a higher value, a marginal relief applies. A is correct. B is wrong — gains on sub-£6,000 chattels are exempt. C is wrong — 50% reduction is not the rule. D is wrong — rollover does not apply to chattel disposals.
Question 321
Enterprise Management Incentives (EMI) shares, on disposal, can qualify for Business Asset Disposal Relief at the reduced CGT rate if:
Select an option first.
Correct answer: B — The shares were granted at least 2 years before disposal and the employee has been employed for 2 years
Explanation: B is correct: for EMI options, the 2-year qualifying period for BADR runs from the date of grant of the EMI option (not from the date of exercise/acquisition of shares). The individual must also have been an employee for 2 years. B correctly describes the rules. A is wrong — it conflates the holding period. C overstates the conditions. D is wrong — specific conditions must be met.
Question 322
An individual dies with an estate valued at £700,000. They have no unused NRB transfers from a deceased spouse and no RNRB. The IHT payable is:
Select an option first.
Correct answer: A — £150,000 (40% × (£700,000 − £325,000))
Explanation: A is correct: IHT = 40% × (estate − NRB) = 40% × (£700,000 − £325,000) = 40% × £375,000 = £150,000. A is correct. B is wrong — ignores the NRB. C is wrong — that is the NRB amount, not the IHT. D is wrong — IHT is payable above the NRB.
Question 323
The transferable nil rate band for IHT works as follows:
Select an option first.
Correct answer: A — On the death of the second spouse, the unused NRB of the first spouse is available to the survivor's estate (the proportion unused is transferred, subject to a maximum of 100%)
Explanation: A is correct: when a spouse or civil partner dies without using their full NRB, the unused proportion can be transferred to the surviving spouse's estate on their later death. The maximum transfer is 100% of one NRB (so the surviving spouse can have up to 200% of the NRB — i.e. £650,000 in 2024/25). A is correct. B is wrong — it doesn't double automatically (depends on first death usage). C is wrong — it is between spouses/civil partners only. D is wrong — it supplements, not replaces, the survivor's own NRB.
Question 324
An individual sells a residential property that was their main residence for 6 years, then let for 4 years, then main residence for 2 years. Total period = 12 years. The chargeable gain is:
Select an option first.
Correct answer: D — The gain relating to 3 years of letting, as 1 year of the letting is covered by the final period exemption
Explanation: D is correct: PPR-exempt period: 6 years (first main residence) + 2 years (second main residence) + last 9 months (final period) = 8 years 9 months. The letting period is 4 years. Of the 4-year letting period, the last 9 months are covered by the final period exemption. So chargeable period = 3 years 3 months out of 12 years. D is the closest correct answer. A gives 4 years (ignoring the final period). B is wrong — PPR does apply. C is wrong — not fully exempt.
Question 325
An individual makes a PET of £400,000 in January 2022. They die in March 2025, leaving an estate of £500,000. The available NRB against the estate at death is:
Select an option first.
Correct answer: A — £325,000 − £400,000 = £0 — fully exhausted by the PET, which is now a chargeable failed PET
Explanation: A is correct: the PET of £400,000 failed when the donor died within 7 years (died March 2025, gift was January 2022 — approximately 3 years 2 months before death). The failed PET is cumulated and uses up the NRB first. NRB = £325,000; PET = £400,000. NRB is fully absorbed by the PET, leaving the estate with no available NRB. IHT on the PET = £400,000 − £325,000 × 40% × (1 − 20% taper for 3–4 years) = £75,000 × 80% = £60,000. A correctly identifies the NRB exhaustion. D incorrectly calculates.
Question 326
Hold-over relief (s165) for gifts of business assets is available on the gift of:
Select an option first.
Correct answer: B — Qualifying business assets — shares in unlisted trading companies, assets used in the donor's trade, agricultural property
Explanation: B is correct: holdover relief is available on qualifying business assets including: shares in unlisted trading companies; business assets used in a trade; agricultural property; and certain other qualifying assets. A is wrong — it is not available on all assets (e.g. quoted shares, investment property). C is wrong — residential property is not a qualifying business asset. D is wrong — listed shares generally do not qualify.
Question 327
When calculating IHT on the estate, which of the following liabilities is deductible?
Select an option first.
Correct answer: B — Mortgage loans secured on property in the estate, credit card debts owed by the deceased, and funeral expenses
Explanation: B is correct: deductible liabilities for IHT include: liabilities outstanding at the date of death contracted by the deceased for consideration; funeral expenses; and mortgages. B provides a comprehensive and correct list. A is wrong — only funeral expenses, not all liabilities. C is wrong — post-death liabilities are not deductible. D is wrong — future tax is not a deduction.
Question 328
For SDLT, the rates on residential property above £250,000 (standard rates, not HRAD) for 2024/25 are:
Select an option first.
Correct answer: A — 0% up to £250,000; 5% on £250,001 to £925,000; 10% on £925,001 to £1.5m; 12% above £1.5m
Explanation: A is correct: the standard SDLT rates for residential property in England are: 0% on the first £250,000 (£0 to £250,000); 5% on £250,001 to £925,000; 10% on £925,001 to £1.5 million; 12% above £1.5 million (as of 2024/25). A is correct. B, C and D are wrong.
Question 329
A surviving spouse inherits the unused RNRB from a deceased first spouse who used none of their RNRB. The surviving spouse's own RNRB on death in 2024/25 is:
Select an option first.
Correct answer: A — £350,000 (own £175,000 + transferred £175,000)
Explanation: A is correct: the RNRB is similarly transferable between spouses/civil partners in the same way as the NRB. If the first spouse used none of their RNRB, the surviving spouse receives an additional 100% of the RNRB = £175,000. Combined RNRB = £175,000 + £175,000 = £350,000. A is correct. B is wrong — RNRB is transferable. C is wrong — £500,000 is not the RNRB total. D is wrong — £325,000 is the NRB.
Question 330
Agricultural property relief (APR) requires the property to be:
Select an option first.
Correct answer: A — Used for agricultural purposes and owned/occupied for at least 2 years (if owner-occupied) or 7 years (if let)
Explanation: A is correct: APR conditions require: (a) the property is 'agricultural property'; (b) it must have been occupied for the purposes of agriculture for at least 2 years (owner-occupied) or owned for at least 7 years (let property). A is correct. B is wrong — must be agricultural use. C is wrong — 2 or 7 years depending on occupation. D is wrong — APR can apply to overseas agricultural property but at different rates.
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