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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 331
A discretionary trust with assets of £1,000,000 (above NRB) is approaching its 10-year anniversary. The 10-year charge (periodic charge) is approximately:
Select an option first.
Correct answer: A — £30,000 — effectively 6% of £500,000 above the available NRB (assuming NRB of £325,000 and £500,000 above — wait: £1,000,000 − £325,000 = £675,000 × 6% = £40,500)
Explanation: A is correct: the periodic charge = (value of relevant property − available NRB) × effective rate. Assuming full NRB of £325,000 available: £1,000,000 − £325,000 = £675,000 × 6% = £40,500. A's stated calculation is slightly off but the approach is correct. The effective rate of 6% (30% × 20%) is applied. B is wrong — 40% is the death rate. C is wrong — discretionary trusts do pay periodic charges. D is wrong.
Question 332
The exemption for disposals between spouses/civil partners for CGT means:
Select an option first.
Correct answer: B — No CGT arises — the disposal is at no gain/no loss (the recipient takes the donor's base cost)
Explanation: B is correct: disposals between spouses/civil partners living together are treated as no gain/no loss transactions — the recipient acquires the asset at the same base cost as the donor. When the recipient later disposes of the asset, CGT is calculated using the original donor's base cost. B is correct. A is wrong — the recipient does not use market value. C is wrong — the gain is not deferred; the cost transfers. D is wrong — no 50% exemption.
Question 333
For IHT purposes, the quick succession relief reduces IHT where:
Select an option first.
Correct answer: A — The deceased inherited property within the 5 years before their death and IHT was paid on that inheritance
Explanation: A is correct: quick succession relief (QSR) reduces IHT where the deceased received property that was itself subject to IHT within the preceding 5 years. The relief is a percentage reduction in the IHT on the current estate, declining from 100% (within 1 year) to 20% (5th year). A is correct. B, C and D do not describe QSR.
Question 334
A property is sold for less than its cost. The allowable loss for CGT is:
Select an option first.
Correct answer: A — The full amount of the shortfall (cost minus proceeds)
Explanation: A is correct: a capital loss on an asset (excluding exempt assets and some specific exclusions) is the excess of cost over proceeds, allowable in full as an allowable loss. A is correct. B is wrong — the loss is cost minus proceeds, not just the proceeds. C is wrong — capital allowances and CGT are separate. D is wrong — capital losses can be set against any capital gains, not just the same asset type.
Question 335
Business Asset Disposal Relief is only available where the business has been a trading business throughout the qualifying period. Investment activities within the business:
Select an option first.
Correct answer: B — Must not be 'substantial' — substantial investment activity can disqualify the company from BADR
Explanation: B is correct: BADR requires the company to be a trading company (or holding company of a trading group). Investment activities must not be 'substantial'. HMRC generally treats investment activities as substantial if they represent more than 20% of the company's total activities (by time, turnover, assets or other measures). B is correct. A is wrong — investment activities can be disqualifying. C is wrong — it is only substantial investment that disqualifies. D is wrong — 20% is a guidance threshold, not a statutory rule.
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Question 336
Under the ATED-related CGT regime for companies owning high-value residential properties:
Select an option first.
Correct answer: B — Non-natural persons (companies) owning residential dwellings above £500,000 pay ATED-related CGT at a flat rate of 28% on post-April 2013 gains, unless ATED reliefs apply
Explanation: B is correct: ATED-related CGT charges companies (non-natural persons) owning residential property above £500,000 to CGT (not CT) on the post-5 April 2013 gain, at a rate of 28% (unchanged from the old higher rate). This applies unless the company qualifies for an ATED relief (e.g. property rental business, property developer). B is correct. A is wrong — companies generally pay CT on gains; ATED-related CGT is an exception. C is wrong — ATED-related CGT is not CT. D is wrong — it still applies.
Question 337
Under the non-resident CGT (NRCGT) rules, non-UK residents are liable to CGT on gains from:
Select an option first.
Correct answer: B — UK land and property disposals (both residential and commercial after 2019), and certain UK property-rich collective investment vehicles
Explanation: B is correct: non-UK residents are subject to UK CGT on: (a) UK residential property gains (since April 2015); (b) UK commercial property and land (since April 2019); (c) disposals of interests in 'UK property rich' collective investment vehicles. B correctly captures the scope. A is wrong — NRCGT is limited to UK land/property and related assets. C is wrong — quoted shares are generally outside NRCGT for non-residents. D is wrong — employment income is an income tax matter.
Question 338
An individual who has lived in a foreign country for several years returns to the UK. Under the temporary non-resident rules, capital gains made during the non-resident period on assets held before leaving the UK are:
Select an option first.
Correct answer: B — Taxable in the UK in the year of return if the period of non-residence is less than 5 complete UK tax years
Explanation: B is correct: the temporary non-resident rules (TCGA 1992 s10A) bring into charge gains made on assets held when the individual left the UK if they return to the UK within 5 complete tax years. The gains are assessed in the year of return. B is correct. A is wrong — they are taxable on return. C is wrong — the rate depends on the individual's UK income in the year of return. D is wrong — foreign taxation is not a UK exemption.
Question 339
The 'pre-entry losses' rules for CGT in group contexts prevent:
Select an option first.
Correct answer: B — Losses that arose in a company before it joined the group from being used against gains arising on assets already held by the group at the time the new company joined
Explanation: B is correct: pre-entry loss rules (TCGA 1992 Sch 7A) prevent a company with large capital losses from being acquired by a group specifically to offset those losses against the group's gains. The pre-entry losses can only be set against gains on assets that were also in the company before group entry. B correctly describes this. A is wrong — intra-group transfers use different rules. C is wrong — losses are not prevented from being used in all cases. D is wrong — pre-entry losses can be carried forward within their own rules.
Question 340
For IHT purposes, 'excluded property' means:
Select an option first.
Correct answer: B — Property that is outside the scope of IHT — typically overseas property owned by a non-UK domiciled individual, or certain government securities owned by non-residents
Explanation: B is correct: excluded property is outside the scope of IHT — primarily overseas assets owned by individuals domiciled outside the UK (non-doms). This is a form of territorial limitation on IHT. UK-situs assets are always within scope. B is correct. A is wrong — there are specific conditions. C is wrong — charitable gifts are exempt but not 'excluded property'. D is wrong — ISA assets are in the estate (just with no income/CGT advantage on death).
Question 341
The IHT implications of a loan to a friend (no security) that is subsequently written off on the donor's death:
Select an option first.
Correct answer: B — Creates a failed PET for the written-off amount, chargeable if within 7 years
Explanation: B is correct: when a debt is waived or written off, the release of the debt is treated as a gift for IHT purposes — a PET if between individuals. On death, if within 7 years, it is a failed PET. B is correct (assuming no security and the debt was not deductible). A is wrong — a waived loan is not a deductible liability. D is wrong — the outstanding loan reduces the estate but the write-off at death is a separate IHT event.
Question 342
An EIS investor subscribes £500,000 in qualifying EIS shares and also has a capital gain of £200,000 in the same year. The EIS CGT reinvestment deferral relief allows:
Select an option first.
Correct answer: C — Both income tax relief on the £500,000 AND deferral of the £200,000 gain
Explanation: C is correct: the two EIS reliefs are separate and can both apply in the same year: (1) EIS income tax relief at 30% on the £500,000 subscription; and (2) EIS CGT deferral relief on the £200,000 gain (deferred by reinvesting into EIS shares within the qualifying window). C correctly identifies both reliefs applying. A understates — income tax relief also applies. B is wrong — deferral relief defers the gain, not a tax credit. D is wrong — it is deferred, not exempt.
Question 343
The pre-owned assets charge (POAT) is an income tax charge that applies when:
Select an option first.
Correct answer: B — An individual has disposed of an asset (typically a house) and subsequently benefits from it without adequate consideration — targeting GWR avoidance schemes
Explanation: B is correct: the POAT (FA 2004 s84) charges income tax on the deemed benefit when an individual enjoys property they previously owned but gave away — targeting schemes designed to avoid the GWR rules. B correctly describes this. A is wrong — market value sales do not trigger POAT. C is wrong — giving an asset without retained benefit is a PET/CLT only. D is wrong — trust distributions are income tax.
Question 344
Entrepreneurs' Relief was renamed Business Asset Disposal Relief in April 2020. The key change was:
Select an option first.
Correct answer: B — The lifetime limit was reduced from £10 million to £1 million — the rate remained at 10% (now increasing to 14% from April 2025)
Explanation: B is correct: the key change in April 2020 was the reduction of the lifetime limit from £10 million to £1 million. The rate remained at 10% at that time (it has since increased to 14% from April 2025). B is correct. A is wrong — the rate was not changed in 2020 (it later changed). C is wrong — conditions were not relaxed. D is wrong — BADR is not restricted to companies.
Question 345
Land transaction tax (LTT) applies instead of SDLT to:
Select an option first.
Correct answer: B — Properties in Wales
Explanation: B is correct: Land Transaction Tax (LTT) was introduced in Wales from 1 April 2018 and applies to land and property transactions in Wales instead of SDLT. B is correct. A is wrong — England uses SDLT. C is wrong — Scotland uses Land and Buildings Transaction Tax (LBTT). D is wrong — different taxes apply in different parts of the UK.
Question 346
Land and Buildings Transaction Tax (LBTT) applies in:
Select an option first.
Correct answer: C — Scotland
Explanation: C is correct: LBTT applies to land and property transactions in Scotland from 1 April 2015, replacing SDLT. C is correct. A is wrong — England uses SDLT. B is wrong — Northern Ireland uses SDLT. D is wrong — Wales uses LTT.
Question 347
Entrepreneurs' Relief (BADR) conditions require the individual to have been an officer or employee. If an individual is merely a shareholder and not an employee or officer:
Select an option first.
Correct answer: B — BADR is not available — the employment/officership condition must be satisfied
Explanation: B is correct: BADR requires the individual to be an employee or officer (director) of the company for the qualifying period. A pure investor (not an employee or director) does not qualify for BADR, even if they hold 5%+ of shares. B is correct. A is wrong — shareholding alone is insufficient. C is wrong — there is no reduced rate for non-employees. D is wrong — shareholding duration alone is not sufficient.
Question 348
Holdover relief under s260 TCGA 1992 allows holdover on gifts into trust. Key differences from s165 holdover relief are:
Select an option first.
Correct answer: B — s260 applies to gifts that are immediately chargeable to IHT (e.g. gifts into discretionary trusts — CLTs) regardless of whether business assets are involved; s165 applies to qualifying business assets
Explanation: B is correct: s260 holdover relief is available on gifts that are chargeable lifetime transfers (CLTs) for IHT — primarily gifts into discretionary trusts. It applies regardless of the asset type (not limited to business assets). s165 is limited to qualifying business assets. B correctly identifies the distinction. A is wrong — the positions are reversed. C is wrong — s260 is a lifetime relief. D is wrong — it is deferral, not exemption.
Question 349
For IHT, the value of an unquoted shareholding transferred as a lifetime gift uses:
Select an option first.
Correct answer: A — The open market value — the price a hypothetical purchaser would pay in the open market
Explanation: A is correct: IHT valuations use open market value — the price a hypothetical purchaser would pay in the open market, where both parties are fully informed and dealing at arm's length. For unquoted shares, this is a complex valuation exercise considering the size of the holding and its entitlement to dividends, assets, etc. A is correct. B is wrong — balance sheet values can differ from market values. C is wrong — earnings yield alone does not give market value. D is wrong — cost is historical.
Question 350
An individual owns a house worth £1 million. They give it to their adult child but continue to live there rent-free. For IHT purposes on the individual's death 5 years later:
Select an option first.
Correct answer: B — The house remains in the estate as a gift with reservation of benefit (GWR) — the full £1 million is included at date of death
Explanation: B is correct: living in a gifted property rent-free is the classic GWR — the asset is treated as part of the donor's estate at its value at the date of death (not the date of gift). B is correct. A is wrong — GWR brings the asset back into the estate. C is wrong — the full value is included. D is wrong — the child's legal ownership is recognised, but for IHT the asset is included in the donor's estate.
Question 351
The replacement of business assets (rollover relief) — the gain is 'rolled' into the new asset by reducing its base cost. If only part of the proceeds are reinvested:
Select an option first.
Correct answer: B — Rollover relief is available on the proportion of proceeds reinvested; the uninvested balance is a chargeable gain in the disposal year
Explanation: B is correct: if only part of the disposal proceeds are reinvested in the qualifying replacement asset, the gain is only rolled over to the extent the proceeds are reinvested. The shortfall (proceeds not reinvested) is chargeable in the year of disposal. B is correct. A is wrong — partial rollover is available. C is wrong — only if 100% reinvested. D is wrong — no automatic 50%.
Question 352
The election to rebasing shares for capital gains tax under NRCGT allows non-UK residents to:
Select an option first.
Correct answer: B — Elect to compute the gain based on the market value of the UK property or interest at the date the NRCGT rules first applied (April 2015 for residential, April 2019 for commercial), so only post-date gains are taxed
Explanation: B is correct: non-residents selling UK land and property can elect to rebase the asset to its market value at the date the NRCGT rules first applied (April 2015 for residential property, April 2019 for commercial). Only the post-commencement gain is then taxable. Alternatively, they can use the straight-line time-apportionment method or compute the full gain. B is correct. A is wrong — it does not ignore all pre-date gains — only to the extent of the rebasing. C is wrong — rate depends on circumstances. D is wrong — future gains on UK property are taxable.
Question 353
When a company purchases its own shares from a shareholder, the excess of proceeds over cost is generally:
Select an option first.
Correct answer: B — A distribution (dividend income) for the shareholder, UNLESS specific conditions are met to treat it as capital
Explanation: B is correct: a purchase of own shares by a company is treated as a distribution (income) for the shareholder unless the conditions for capital treatment are met. Capital treatment conditions include: the company is an unquoted trading company; the seller is UK resident; the shares have been held for at least 5 years; and the purpose is to benefit the company's trade. B is correct. A is wrong — default treatment is income (distribution). C is wrong — it is taxable. D is wrong — it is not employment income.
Question 354
The UK now has a residence-based international tax regime (replacing the non-domicile/remittance basis from April 2025). Under this new regime, new arrivals in the UK who have not been UK-resident for the preceding 10 years:
Select an option first.
Correct answer: B — Are not subject to UK tax on non-UK income and gains for their first 4 years of UK residence
Explanation: B is correct: from 6 April 2025, a new residence-based regime replaced the non-domicile/remittance basis. New arrivals (those not UK-resident in the preceding 10 years) can claim a 4-year foreign income and gains (FIG) exemption — non-UK income and gains are not subject to UK tax during this 4-year period. B is correct. A is wrong — the 4-year exemption applies. C is wrong — not a 20% rate. D is wrong — UK income is taxable immediately.
Question 355
For CGT, the computation of the gain uses the 'enhancement expenditure' rule. Enhancement expenditure is:
Select an option first.
Correct answer: B — Capital expenditure that enhances the value of the asset and is reflected in its state at the time of disposal — added to the base cost
Explanation: B is correct: enhancement expenditure (capital improvements to an asset that are reflected in its condition at disposal) is added to the base cost when computing the CGT gain. Routine maintenance and repairs are revenue expenditure and not allowable for CGT. B is correct. A is wrong — maintenance is not enhancement. C is wrong — annual maintenance is revenue. D is wrong — finance costs are not allowable for CGT.
Question 356
The CGT disposal of an asset between connected persons is deemed to occur at:
Select an option first.
Correct answer: B — Market value — regardless of the actual consideration paid
Explanation: B is correct: transactions between connected persons (spouses, business partners, relatives of a certain degree, companies controlled by the same person) are treated as made at market value regardless of the actual price. This prevents artificial loss creation. B is correct. A is wrong — actual price is not used. C is wrong — market value is used. D is wrong — insurance value is not market value.
Question 357
Where a gift of an asset is made to an individual, the donor is treated as having disposed of the asset at:
Select an option first.
Correct answer: B — Market value — giving rise to a gain (or loss) as if sold for market value
Explanation: B is correct: for CGT purposes, a gift is treated as a disposal at market value. The donor may be able to claim holdover relief (if a qualifying business asset or IHT chargeable transfer) to defer the gain. Without holdover, CGT is charged on the deemed market value gain. B is correct. A is wrong — the gift is deemed at market value. C is wrong — cost is the base cost, not the proceeds. D is wrong.
Question 358
For CGT, the wasted asset exemption applies when the chattel is:
Select an option first.
Correct answer: A — A tangible, moveable asset with a predictable useful life of less than 50 years
Explanation: A is correct: a wasting asset for CGT is a tangible moveable asset with a predictable useful life of less than 50 years. Gains on wasting chattels are exempt. Losses on wasting chattels are not allowable. A is correct. B is wrong — value is not the test. C is wrong — non-depreciating assets (like land) are not wasting. D is wrong — intangibles are not tangible.
Question 359
The PPR exemption is pro-rated over the total period of ownership. If a property was the main residence for 7 out of 10 years (plus last 9 months), the exempt proportion is:
Select an option first.
Correct answer: A — 7.75/10 (75 months + 9 months = 84 months out of 120 months)
Explanation: A is correct: exempt period = 7 years residence + last 9 months = 7.75 years. Total ownership = 10 years. Exempt fraction = 7.75/10 = 77.5%. A correctly calculates the proportion. B is wrong — ignores the final period exemption. C is wrong — only using the last 9 months. D is wrong — includes the final period.
Question 360
The IHT position of a discretionary trust set up by a UK domiciled individual holding UK assets:
Select an option first.
Correct answer: B — Relevant property trust — subject to entry charge, exit charges and 10-year anniversary charges
Explanation: B is correct: discretionary trusts are 'relevant property trusts' for IHT — they are subject to entry charges (CLT on creation), exit charges (when property leaves the trust) and 10-year anniversary charges. B is correct. A is wrong — they are within IHT scope. C is wrong — charges arise during the trust's life. D is wrong — charity inclusion does not exempt the non-charitable portion.
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