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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 361
For IHT, property passing to a surviving spouse under a trust for life (qualifying interest in possession — QIIP) created before 22 March 2006 is:
Select an option first.
Correct answer: B — Treated as part of the life tenant's estate for IHT — not a chargeable transfer to the trust or a CLT
Explanation: B is correct: for trusts created before 22 March 2006, a qualifying interest in possession (QIIP) is treated as if the life tenant owns the trust assets — the assets are in the life tenant's estate for IHT. On the death of the life tenant, the assets pass under the trust terms but are included in the deceased life tenant's estate. B is correct. A is wrong — no entry charge on QIIP transfer. C is wrong — 10-year charges are for relevant property trusts. D is wrong — included in life tenant's estate.
Question 362
The main exemptions from IHT include which of the following correctly stated set?
Select an option first.
Correct answer: A — Spouse exemption (unlimited for UK-domiciled couples), annual exemption £3,000, small gifts £250, normal expenditure out of income, charity exemption
Explanation: A is correct: the main IHT exemptions include: unlimited spouse exemption (for UK-domiciled to UK-domiciled transfers); annual exemption £3,000; small gifts £250 per recipient; normal expenditure out of income; charity exemption; and others (wedding gifts, etc.). A is correct. B is wrong — spouse exemption is unlimited (not £325,000) and annual exemption is £3,000. C is wrong — £5,000 annual exemption is incorrect. D is wrong — only one exemption listed.
Question 363
For CGT, the market value rule applies when an asset is transferred to a connected person at undervalue. The result for the buyer is:
Select an option first.
Correct answer: B — The buyer uses market value as their base cost (regardless of actual price paid)
Explanation: B is correct: when an asset is acquired from a connected person, the acquirer's base cost is market value (the same value the seller is deemed to have received). This prevents artificial loss creation by ensuring the base cost 'resets' to market value. B is correct. A is wrong — actual price is not used. C is wrong — midpoint is not the rule. D is wrong — original cost does not transfer.
Question 364
Under BADR, the minimum period of ownership of shares in a personal company is:
Select an option first.
Correct answer: A — 2 years — shares must be held and employment/office conditions met for at least 2 years before disposal
Explanation: A is correct: BADR requires the individual to have held the shares (and met all conditions: 5%+ shareholding, employment/directorship, 5% of distributable profits and assets) for at least 2 years immediately before disposal. A is correct. B is wrong — 5 years is not required. C is wrong — 6 months is too short. D is wrong — 2 years is required.
Question 365
For CGT, an asset that was used partly for business and partly for private purposes — the gain is:
Select an option first.
Correct answer: B — Apportioned — the business-use proportion may qualify for BADR or holdover relief; the private proportion is subject to CGT without reliefs
Explanation: B is correct: where an asset is used for mixed business/private purposes, the gain is apportioned. The business proportion may qualify for business asset reliefs (rollover, holdover, BADR). The private proportion is a normal chargeable gain. B is correct. A is wrong — partial exemption only. C is wrong — apportionment applies. D is wrong — only the business proportion gets relief.
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Question 366
The IHT implications of the death of a life tenant of an interest in possession trust (post-22 March 2006, where the interest was created after that date):
Select an option first.
Correct answer: B — For post-2006 IIPs that are not transitional serial interests or TSIs, the life interest is generally a relevant property trust — periodic charges apply, not aggregation with life tenant's estate
Explanation: B is correct: post-22 March 2006 non-qualifying IIPs (most newly created ones) are relevant property trusts — periodic charges and exit charges apply; the life tenant does not aggregate the trust with their estate. B is correct. A describes the pre-2006 position. C is wrong — IHT applies. D is wrong — 50% is not the rule.
Question 367
The exemption from CGT for gilt-edged securities (government bonds) means:
Select an option first.
Correct answer: B — Gains and losses on gilt-edged securities are outside the scope of CGT — both the gains are exempt and the losses are not allowable
Explanation: B is correct: gilt-edged securities are specifically exempt from CGT (TCGA 1992 s115). This means gains are not chargeable and losses are not allowable. B is correct. A is wrong — losses are also not allowable. C is wrong — interest on gilts is taxable as savings income. D is wrong — gilts are a CGT exemption, not solely a capital matter.
Question 368
For IHT, a deed of variation allows:
Select an option first.
Correct answer: A — Beneficiaries to redirect inherited assets so that the tax position is as if the deceased had made the gift — backdated to death for IHT and CGT purposes (within 2 years of death, with HMRC notification)
Explanation: A is correct: a deed of variation (or family arrangement) can redirect inherited assets within 2 years of death. If the appropriate statements are included, the variation is treated as if the deceased had made the gift — backdated for IHT and CGT purposes. This can be used to redirect assets to a spouse (using the spouse exemption) or to charity (getting the 36% rate). A is correct. B is wrong — HMRC notification is required. C is wrong — it is beneficiaries, not executors, who vary. D is wrong — it redirects, not eliminates, the IHT (though it may reduce it).
Question 369
Rollover relief requires the new qualifying asset to be acquired in the window of:
Select an option first.
Correct answer: A — 1 year before to 3 years after the disposal date
Explanation: A is correct: rollover relief requires the replacement asset to be acquired in the window starting 12 months before the disposal and ending 36 months (3 years) after. Both the old and new assets must be qualifying business assets. A is correct. B is wrong — 5 years is not the window. C is wrong — the window starts 1 year before. D is wrong — same tax year is not the rule.
Question 370
Holdover relief under s165 is NOT available when the donee is:
Select an option first.
Correct answer: B — A non-resident — holdover is not available to non-UK residents (as the gain would escape UK CGT)
Explanation: B is correct: holdover relief under s165 is not available where the donee is non-resident (at the time of the gift or within 6 years), because the held-over gain would escape UK CGT when the non-resident disposes of the asset. B is correct. A is wrong — holdover is available to UK residents. C is wrong — s165 applies to individuals (gifts to companies use different rules). D is wrong — children who are UK residents can receive holdover.
Question 371
The inheritance tax treatment of a potentially exempt transfer (PET) where the donor dies exactly 5 years after the gift:
Select an option first.
Correct answer: B — 40% IHT reduced by 60% taper relief (5–6 years band) = effective rate of 16% on the excess above NRB
Explanation: B is correct: taper relief for deaths 5–6 years after the gift = 60% reduction. IHT rate = 40% × (1 − 60%) = 40% × 40% = 16%. So on the failed PET (above NRB), the effective rate is 16%. B is correct. A is wrong — taper applies. C is wrong — 7 years required for full exemption. D is wrong — 20% is the lifetime CLT rate.
Question 372
For IHT, the value of an estate includes jointly-owned property with another person. Where property is owned as joint tenants (not tenants in common), on death:
Select an option first.
Correct answer: B — The property automatically passes to the surviving joint tenant by survivorship — the deceased's share passes outside the estate (though its value is included for IHT purposes)
Explanation: B is correct: joint tenancy means on death, the property passes to the surviving joint tenant by survivorship (not via the will). However, the deceased's share is included in their estate for IHT valuation purposes (typically at 50% of market value with a discount for co-ownership). B is correct. A is wrong — it passes to survivor but is included for IHT. C is wrong — only the deceased's share (50%) is included. D is wrong — no reason for 25%.
Question 373
The election for UK domicile (deemed domicile by election for IHT) is now replaced by the new residence-based regime from April 2025. Previously, a non-UK domiciled spouse could elect to be treated as UK-domiciled, with the consequence:
Select an option first.
Correct answer: A — Unlimited spouse exemption for transfers from UK-domiciled spouse, but worldwide assets brought into UK IHT scope
Explanation: A is correct: under the old non-dom/deemed domicile election, a non-UK domiciled spouse who elected to be treated as UK-domiciled gained the unlimited spouse exemption on transfers from their UK-domiciled spouse. However, the consequence was that their worldwide assets (not just UK assets) became subject to UK IHT. A is correct. B is wrong — significant tax consequences applied. C is wrong — worldwide assets came within scope. D is wrong — the election was irrevocable in practice.
Question 374
The 'chattels exemption' for CGT exempts gains on tangible moveable property (other than wasting chattels) where gross proceeds are:
Select an option first.
Correct answer: A — £6,000 or less per item
Explanation: A is correct: the chattel exemption exempts gains on tangible moveable property where the gross sale proceeds do not exceed £6,000. If proceeds exceed £6,000, marginal relief applies. A is correct. B is wrong — £10,000 is not the threshold. C is wrong — £3,000 is not the threshold. D is wrong — only chattels with proceeds ≤£6,000 are exempt.
Question 375
For CGT, if a person makes a capital loss on shares in an unquoted trading company (subscribed for shares), there is a special relief allowing:
Select an option first.
Correct answer: B — The share loss to be converted into an income tax relief — set against income of the current year or preceding year (under ITA 2007 s131)
Explanation: B is correct: under s131 ITA 2007, a qualifying share loss (on shares originally subscribed for in an unquoted trading company) can be claimed against income (not just capital gains) of the current year or preceding year. This provides a valuable income tax relief at the individual's marginal rate. B is correct. A is wrong — this special relief allows income offset. C is wrong — individuals, not companies, claim this. D is wrong — the relief exists.
Question 376
APR (agricultural property relief) — the term 'agricultural property' includes:
Select an option first.
Correct answer: B — Agricultural land, woodland ancillary to the agricultural land, farm buildings, farmhouses (of a character appropriate to the land), and cottages
Explanation: B is correct: agricultural property for APR includes: agricultural land and pastures; woodland, forests and buildings used in connection with agricultural land; farmhouses and cottages (of a character appropriate to the agricultural land); farm buildings. B correctly lists the main categories. A is wrong — not just arable. C is wrong — urban gardens are not agricultural property. D is wrong — must be genuinely agricultural.
Question 377
For IHT, the tax on the deceased's estate is due:
Select an option first.
Correct answer: B — By the end of the 6th month after the month of death — i.e. 6 months after the date of death (executor's obligation to pay)
Explanation: B is correct: IHT on the death estate is generally due 6 months after the end of the month of death (i.e. the due date is the last day of the 6th month after the month of death). Personal representatives are liable to pay. B is correct. A is wrong — 6 months is allowed. C is wrong — 12 months is too long. D is wrong — although probate is obtained separately, IHT must be paid to obtain probate in practice.
Question 378
The IHT payable on gifts of unquoted shares in a trading company (assuming BPR applies at 100%):
Select an option first.
Correct answer: B — 0% — 100% BPR eliminates the IHT charge on qualifying shares
Explanation: B is correct: where 100% BPR applies, the entire value of the qualifying unquoted trading company shares is relieved from IHT — the effective charge is nil. B is correct. A is wrong — BPR eliminates the charge. C is wrong — 50% applies only to assets qualifying for 50% BPR. D is wrong — 20% is the lifetime CLT rate on the non-relieved element.
Question 379
For CGT purposes, the base cost of an asset acquired as a gift (where holdover was NOT claimed) is:
Select an option first.
Correct answer: B — Market value at the date the gift was received — as the donor was treated as disposing at market value and the donee acquires at that same market value
Explanation: B is correct: where no holdover is claimed, the donee acquires the asset at market value on the date of the gift (since the donor is treated as disposing at market value). The donee's base cost is therefore market value on the date of receipt. B is correct. A is wrong — the original cost does not transfer (only if holdover is claimed does the donor's base cost carry forward). C is wrong — market value, not lower of. D is wrong — insurance value is not market value.
Question 380
The CGT 'bed and ISA' strategy allows an investor to:
Select an option first.
Correct answer: B — Crystallise gains within the annual exempt amount and repurchase in an ISA without the 30-day anti-avoidance rule applying (as the ISA repurchase is different shares/wrapper)
Explanation: B is correct: the bed and ISA strategy involves selling shares (crystallising a gain within the AEA or a loss) and repurchasing the same shares within an ISA. The 30-day matching rule does not apply because the ISA-held shares are treated as separate assets. Future gains within the ISA are then exempt from CGT. B is correct. A incorrectly states CGT is avoided on the sale (any gain on the sale is still taxable). C is wrong — the AEA is not doubled. D is wrong — only ISA gains are exempt going forward.
Question 381
An individual disposes of business assets but does not fully reinvest the proceeds in qualifying replacement assets. Partial rollover relief available means:
Select an option first.
Correct answer: B — The gain is rolled over to the extent of reinvestment; the unreinvested portion is immediately chargeable
Explanation: B is correct: where only part of the proceeds are reinvested in qualifying replacement assets, rollover relief applies to the reinvested amount. The balance of proceeds not reinvested (the 'excess') is an immediately chargeable gain in the disposal year. B is correct. A is wrong — partial rollover is available. C is wrong — spreading is not rollover. D is wrong — full deferral requires full reinvestment.
Question 382
For inheritance tax, a binding contract for sale exemption means that if property is subject to a binding contract for sale at the date of death:
Select an option first.
Correct answer: B — Business property relief and agricultural property relief do not apply to property subject to a binding contract for sale (as the potential purchaser would not acquire business or agricultural property for those purposes)
Explanation: B is correct: BPR and APR are denied where property is subject to a binding contract for sale at the time of the transfer — because the property will shortly be converted to cash by the purchaser and will not continue in business/agricultural use. B is correct. A is wrong — contract price may differ from IHT value. C is wrong — the property is included. D is wrong — IHT is due on normal timescales.
Question 383
For CGT, the negligible value claim allows an individual to:
Select an option first.
Correct answer: B — Treat the asset as having been disposed of and immediately reacquired at its negligible value — creating a capital loss (which can be backdated to the start of an earlier tax year if the asset became of negligible value then)
Explanation: B is correct: a negligible value claim under TCGA 1992 s24(2) is treated as a disposal and reacquisition at the specified value (typically nil). This crystallises a capital loss. The claim can be backdated up to 2 years. B is correct. A is wrong — a loss is created. C is wrong — the asset is treated as reacquired at nil. D is wrong — it is a CGT loss (though s131 ITA may convert it for qualifying shares).
Question 384
The stamp duty exemption that applies to the issue of new shares by a company (initial subscription) means:
Select an option first.
Correct answer: B — No stamp duty applies on the issue of new shares by a company — only transfers of existing shares attract stamp duty
Explanation: B is correct: stamp duty (at 0.5%) applies only to the transfer of existing shares. The initial issue of new shares by a company does not attract stamp duty — the company is not selling existing shares. B is correct. A is wrong — new issues are exempt. C is wrong — no stamp duty on new issues. D is wrong — new issues are exempt.
Question 385
For IHT, the £3,000 annual exemption can be used to cover:
Select an option first.
Correct answer: B — Any transfer not covered by another exemption — the £3,000 applies to the total gifts not otherwise exempt, with any unused balance carried forward one year
Explanation: B is correct: the annual exemption of £3,000 covers any gifts not covered by other exemptions (wedding gifts, small gifts, normal expenditure). It applies to the value of gifts made in the tax year, with unused balance carried forward one year only. B is correct. A is wrong — other exemptions must be considered first. C is wrong — non-cash gifts also qualify. D is wrong — any person can receive the exempt gift.
Question 386
A life interest in possession trust (pre-22 March 2006) means the capital held in trust is:
Select an option first.
Correct answer: B — Not subject to periodic IHT charges — it is treated as part of the life tenant's estate (for IHT) while they have the interest
Explanation: B is correct: for old IIP trusts (pre-2006), the life tenant is treated for IHT as if they directly owned the trust capital — no entry CLT charge and no periodic 10-year charges. On the death of the life tenant, the capital is included in their estate. B is correct. A is wrong — no entry charge. C is wrong — no exit charges on old IIP trusts. D is wrong — included in life tenant's estate.
Question 387
For CGT, the date of acquisition is important because indexation allowance (for companies) or the base cost is established at:
Select an option first.
Correct answer: B — The date of acquisition — which is the date of the contract (unconditional) or, if conditional, the date conditions are fulfilled
Explanation: B is correct: the date of acquisition (and therefore when the base cost is established) follows the same rule as the disposal date — the date of the contract if unconditional, or the date conditions are fulfilled. B is correct. A is wrong — group entry date is for a different concept. C is wrong — first use is not the acquisition date. D is wrong — payment date is not the acquisition date.
Question 388
EIS shares that were held for less than 3 years and are disposed of at a loss — the allowable loss is:
Select an option first.
Correct answer: B — The cost less the EIS income tax relief given — the loss is reduced by the income tax relief already received (to prevent double relief)
Explanation: B is correct: where EIS shares are disposed of at a loss and were held for less than 3 years (income tax relief being withdrawn), the allowable CGT loss is the actual loss (proceeds − cost). But where held for 3+ years and income tax relief was not withdrawn, the loss is reduced by the income tax relief given, to prevent double relief. B correctly describes the general principle of loss reduction by the income tax relief received. A is wrong — the loss is reduced. C is wrong — losses are allowable. D is wrong — no additional refund.
Question 389
For CGT, the 'identification rules' apply in what order for an individual disposing of shares?
Select an option first.
Correct answer: B — Same-day acquisitions first (1), then acquisitions in following 30 days (2), then the s104 pool (3)
Explanation: B is correct: share matching rules for individuals (TCGA 1992 ss105-107) apply in order: (1) shares acquired on the same day as the disposal; (2) shares acquired in the 30 days following the disposal (FIFO within this period); (3) the s104 pool. B is correct. A is wrong — same-day acquisitions are matched first. C and D are wrong.
Question 390
A gift of listed shares (non-EIS, non-BADR qualifying) to an individual where no holdover is claimed — what are the CGT consequences for the donor?
Select an option first.
Correct answer: B — CGT on the deemed gain (market value at date of gift minus base cost); no holdover available for listed shares unless they qualify for s165 holdover
Explanation: B is correct: listed shares do not qualify for s165 holdover relief (holdover is limited to qualifying business assets — listed shares are generally not qualifying). So the donor has a deemed disposal at market value and pays CGT on any gain. B is correct. A is wrong — CGT arises. C is wrong — rate depends on marginal rate. D is wrong — no deferral without holdover.
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