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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 211
For VAT partial exemption, a business that makes both taxable and exempt supplies:
Select an option first.
Correct answer: B — Can only recover the proportion of input VAT that relates to its taxable supplies (using a partial exemption calculation)
Explanation: B is correct: partially exempt businesses can only recover input VAT attributable to taxable supplies. The partial exemption calculation uses either the standard method (proportion of taxable/total supplies) or a special method agreed with HMRC. A is wrong — exempt supply input VAT is blocked. C is wrong — partially exempt businesses can register. D is wrong — registration depends on taxable turnover.
Question 212
The de minimis limit for VAT partial exemption (allowing full input tax recovery despite exempt supplies) is:
Select an option first.
Correct answer: A — £625 per month (£7,500 per year) of exempt input tax AND less than 50% of all input tax
Explanation: A is correct: a business is de minimis for partial exemption if its exempt input tax does not exceed £625 per month (£7,500 per year) AND does not exceed 50% of all input tax for the period. If de minimis, all input VAT is recoverable. B, C and D are wrong — these are not the correct thresholds.
Question 213
Under the SDLT linked transactions rules, where a buyer acquires a portfolio of properties from the same seller under a series of related transactions:
Select an option first.
Correct answer: B — The transactions are linked and SDLT is calculated on the aggregate consideration
Explanation: B is correct: linked transactions under FA 2003 are aggregated — the total consideration for all linked transactions is used to determine the SDLT rate, which is then applied pro rata to each property. This prevents artificial fragmentation to access lower rate bands. A is wrong — separate calculation would allow rate band manipulation. C and D are wrong.
Question 214
CFC gateway tests determine whether a company has chargeable profits attributable to the UK. One gateway is the 'profit motive' gateway. The CFC charge does NOT apply if:
Select an option first.
Correct answer: B — The CFC passes one of the exemption tests — including the exempt period exemption (first 12 months), or the low profit margin exemption, or the excluded territories exemption
Explanation: B is correct: the CFC rules include multiple exemptions — if the CFC meets one of the exemption conditions, no CFC charge arises. Key exemptions include: exempt periods (first 12 months), excluded territories (low-risk tax jurisdictions on the whitelist), low profits (gross income
Question 215
The anti-fragmentation rule for corporate interest restriction:
Select an option first.
Correct answer: A — Prevents companies from splitting into smaller units to use multiple £2 million allowances
Explanation: A is correct: the £2 million de minimis threshold for the CIR applies to the group as a whole (not per company). Anti-fragmentation provisions prevent groups from splitting into separate corporate structures to claim multiple £2 million allowances. A is correct. B describes a different aspect. C is wrong — it applies broadly. D is wrong — intra-group interest may be restricted but the provision is about the group threshold.
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Question 216
A UK parent company has a wholly-owned trading subsidiary in a low-tax jurisdiction. The subsidiary has a 60% effective tax rate relative to UK CT. A CFC charge applies because:
Select an option first.
Correct answer: A — 60% is below the 75% threshold — the subsidiary is not paying at least 75% of the UK CT rate
Explanation: A is correct: the local tax threshold for the CFC regime is 75% of the equivalent UK CT — if the foreign company pays local tax at less than 75% of the UK CT rate (i.e. less than 18.75% if UK CT is 25%), the profit condition may be met. However, 60% of 25% = 15% — wait, the 75% test compares the foreign tax paid to the UK CT that would have been payable. At 60% of UK rate, it fails the 75% test. A correctly identifies this. B and C are wrong — 60% of UK rate fails the 75% threshold. D is wrong — the tax rate is central to the CFC analysis.
Question 217
The 'arm's length range' in transfer pricing means:
Select an option first.
Correct answer: B — A range of prices that independent parties might agree — if the actual price falls within the range, no adjustment is required
Explanation: B is correct: transfer pricing analysis recognises that arm's length pricing may not produce a single unique answer — instead, a range of outcomes is possible. If the actual price falls within the arm's length range, no adjustment is needed. If outside the range, the adjustment is made to the appropriate point within the range (typically the median). A is wrong — a range applies. C is wrong — HMRC does not set prices. D is wrong — connected prices are presumed not at arm's length.
Question 218
A UK company sells its entire shareholding in a trading subsidiary for £5 million. The shares were acquired 3 years ago for £2 million. The tax position (assuming SSE conditions are met) is:
Select an option first.
Correct answer: B — Exempt from CT — the £3 million gain is not taxable
Explanation: B is correct: if the substantial shareholding exemption conditions are met (10% held for 12+ months, trading company, etc.), the entire gain of £3 million is exempt from CT. B is correct. A is wrong — SSE exempts the gain. C is wrong — no CT is payable on an SSE-qualifying disposal. D is wrong — SDLT applies to land/property, not share acquisitions (stamp duty applies to shares at 0.5%).
Question 219
A company has a December year end (i.e., accounting period 1 January 2025 to 31 December 2025). For QIP purposes, if it is a very large company, the first instalment date is:
Select an option first.
Correct answer: A — 14 July 2025 (6 months and 14 days after start of AP)
Explanation: A is correct: for very large companies (profits over £20 million after division by associated companies), quarterly instalments are due from the 3rd month of the accounting period onwards. For a January start, instalments are due in months 3, 6, 9 and 12 — i.e., March, June, September and December. For large (not very large) companies, the first instalment is 6 months and 13 days into the AP. A gives the correct first instalment date for large companies. B, C and D are wrong.
Question 220
A company demerges its subsidiary under a statutory demerger. The key tax advantage is:
Select an option first.
Correct answer: B — The demerger can be structured to be exempt from income tax for shareholders and CGT/CT for the company, provided conditions are met
Explanation: B is correct: statutory demergers (ICTA 1988 s213-217, now in CTA 2010) allow a trading company to distribute shares in a subsidiary without the distribution being treated as a dividend (income) for shareholders and without a CT charge for the distributing company, provided conditions (including the 'five-year trading requirement') are met. B correctly identifies the tax neutrality available. A is wrong — specific conditions must be met. C is wrong — SDLT may apply to transferred property. D is wrong — SSE depends on its own conditions.
Question 221
The SDLT higher rates apply to purchases of additional residential dwellings. A key condition is:
Select an option first.
Correct answer: B — The purchaser (or their spouse/civil partner) owns two or more residential properties at the end of the day of the transaction (unless replacing a main residence)
Explanation: B is correct: the 3% HRAD surcharge applies when the purchaser (or their civil partner) will own 2 or more residential properties following the purchase, unless the transaction is a replacement of a main residence. B correctly identifies when the higher rates trigger. A is wrong — the test is 2+ properties post-transaction. C is wrong — the surcharge applies at all values. D is wrong — intention is not the test; ownership count is.
Question 222
The controlled foreign company exemption for low profits applies when the CFC's profits are:
Select an option first.
Correct answer: A — Less than £500,000 of accounting profits or less than £50,000 of non-trading finance profits
Explanation: A is correct: the low profit exemption for CFCs applies if the CFC's accounting profits for the period are £500,000 or less, or if the CFC's non-trading finance profits are £50,000 or less. Either condition, if met, provides the exemption. A is correct. B, C and D do not match the statutory thresholds.
Question 223
A company has brought-forward losses of £20 million and current year profits of £8 million. The maximum relief available in the current year (applying the 50% deduction allowance) is:
Select an option first.
Correct answer: B — 50% of profits above the £5 million deduction allowance plus the full £5 million = £5 million + (50% × £3 million) = £6.5 million
Explanation: B is correct: the deduction allowance means: up to £5 million of c/f losses can be deducted in full; for profits above £5 million (here £8 million − £5 million = £3 million additional), only 50% can be sheltered (50% × £3 million = £1.5 million). Total relief = £5 million + £1.5 million = £6.5 million. Remaining taxable profits = £8 million − £6.5 million = £1.5 million. B is correct. A is wrong — the 50% restriction applies above £5 million. C is wrong — the full £5 million deduction allowance is disregarded. D is wrong — only using £5 million ignores the additional 50% relief.
Question 224
A company disposes of a commercial property for £1.2 million. It originally cost £600,000. Indexation allowance (frozen at December 2017) has increased the cost to £750,000 for CT purposes. The chargeable gain is:
Select an option first.
Correct answer: A — £450,000 (£1,200,000 − £750,000)
Explanation: A is correct: chargeable gain for CT = disposal proceeds − (cost + indexation allowance) = £1,200,000 − £750,000 = £450,000. Indexation allowance (frozen December 2017) increases the cost base, reducing the taxable gain. A is correct. B is wrong — B ignores the indexation allowance. C is wrong — that is the disposal proceeds. D is wrong — indexation reduces the gain but does not eliminate it here.
Question 225
For corporation tax, the 'super-deduction' (150% enhanced deduction) applied:
Select an option first.
Correct answer: A — From 1 April 2021 to 31 March 2023 only — for main pool plant and machinery
Explanation: A is correct: the super-deduction (150% first-year allowance for main pool P&M) applied from 1 April 2021 to 31 March 2023. It was replaced by full expensing from 1 April 2023. A is correct. B is wrong — it was a time-limited measure. C is wrong — it applied to capital investment. D is wrong — it applied nationally.
Question 226
Full expensing (100% FYA for companies on main pool P&M from 1 April 2023) applies to:
Select an option first.
Correct answer: B — Only new (never previously used) main pool plant and machinery
Explanation: B is correct: full expensing applies only to new plant and machinery (never previously used) in the main pool. Second-hand assets do not qualify. Cars and special rate assets do not qualify for 100% full expensing (special rate assets get 50% FYA). B is correct. A is wrong — second-hand excluded. C is wrong — cars and long-life assets excluded. D is wrong — land and buildings are not plant and machinery.
Question 227
A company receives a dividend from a UK subsidiary (100% owned). The dividend is:
Select an option first.
Correct answer: B — Exempt from CT under the dividend exemption (intra-group UK dividends)
Explanation: B is correct: dividends received from a UK subsidiary (group company) are exempt from UK corporation tax under the dividend exemption regime in CTA 2009. No CT is payable on intra-group UK dividends. B is correct. A is wrong — dividends from UK subsidiaries are generally exempt. C is wrong — no partial exemption applies. D is wrong — not partially exempt.
Question 228
A company disposes of plant and machinery from the main pool. The proceeds are:
Select an option first.
Correct answer: B — Deducted from the pool — if proceeds exceed the pool balance, a balancing charge arises on the excess; if a deficit remains, a writing-down allowance is available
Explanation: B is correct: disposal proceeds are deducted from the main pool. If proceeds exceed pool value (pool goes negative), a balancing charge arises — increasing taxable profits by the excess. If pool remains positive, WDA continues. B is correct. A is wrong — proceeds are deducted from, not added to, the pool. C is wrong — the pool mechanism applies. D is wrong — capital allowances, not CGT, govern P&M disposals for trading businesses.
Question 229
The research and development expenditure credit (RDEC) for large companies from April 2023 provides a credit of:
Select an option first.
Correct answer: A — 20% of qualifying R&D expenditure (taxable credit that appears 'above the line' in the accounts)
Explanation: A is correct: from April 2023, the RDEC rate increased to 20% of qualifying R&D expenditure. The credit is taxable ('above the line') — so the net benefit after CT is approximately 15%. A is correct. B is wrong — 13% was the pre-April 2023 rate. C is wrong — 35% is not the rate. D is wrong — 200% enhancement was the old large company super-deduction approach.
Question 230
The merged R&D scheme (from April 2024) provides for:
Select an option first.
Correct answer: B — A single scheme for all companies — relief at either the RDEC rate (20%) or enhanced SME deduction, merging the previous two regimes
Explanation: B is correct: from April 2024, the government introduced a merged R&D scheme that broadly combines the previous SME enhanced deduction and RDEC schemes into one. Under the merged scheme, the headline credit is 20% (broadly the RDEC rate) for most companies. Loss-making R&D-intensive SMEs retain a separate higher rate. B is correct. A understates the merger. C is wrong — there are changes. D is wrong — full expensing is for capital assets.
Question 231
A company has a period of account of 18 months. For corporation tax purposes, this is split into:
Select an option first.
Correct answer: A — Two accounting periods: first 12 months and the remaining 6 months
Explanation: A is correct: a period of account exceeding 12 months is split into: (a) the first 12 months, and (b) the remaining period (here, 6 months). Each is a separate accounting period with its own CT computation, payment dates and filing deadlines. A is correct. B is wrong — cannot exceed 12 months. C is wrong — not three periods. D is wrong — not 9-month split.
Question 232
A company group operates a transfer pricing documentation policy. HMRC can enquire into transfer pricing where:
Select an option first.
Correct answer: B — Transactions between connected companies are not on arm's length terms — HMRC has powers to enquire and adjust
Explanation: B is correct: HMRC can enquire into any connected party transaction (domestic or cross-border) that is not on arm's length terms. The transfer pricing rules apply to all connected party transactions above de minimis thresholds (medium to large companies). B is correct. A is wrong — it applies to domestic transactions too. C is wrong — no £10 million threshold for enquiry. D is wrong — all types of transactions.
Question 233
For VAT purposes, a 'supply' takes place when:
Select an option first.
Correct answer: B — Any transaction (sale, service, barter) is made in the course of a business — the time of supply (tax point) determines when VAT is due
Explanation: B is correct: a taxable supply occurs when goods or services are provided in the course of a business (subject to being a registered person or required to be registered). The basic tax point is the time of supply — when goods are delivered or services performed. An actual tax point may arise earlier (invoice or payment). B is correct. A is wrong — cash receipt is the earlier of payment/invoice for certain supplies. C is wrong — the basic tax point may precede the invoice. D is wrong.
Question 234
A business makes a mixed supply (some standard-rated and some exempt). For VAT recovery purposes:
Select an option first.
Correct answer: B — Only the proportion of input VAT attributable to taxable supplies is recoverable (partial exemption)
Explanation: B is correct: where a business makes both taxable and exempt supplies, it falls within the partial exemption rules. Only input VAT that relates to taxable supplies is recoverable. Input VAT on exempt supplies is generally not recoverable. B is correct. A is wrong — exempt supplies block input VAT recovery. C is wrong — taxable supply input VAT is recoverable. D is wrong — only exempt supply input VAT is blocked.
Question 235
The time of supply (basic tax point) for services for VAT is:
Select an option first.
Correct answer: B — When the service is performed (completed)
Explanation: B is correct: the basic tax point for services is when the service is performed. An 'actual tax point' may arise earlier if a VAT invoice is issued or payment is received before the basic tax point. B is correct. A is wrong — contract date is not the tax point. C is wrong — payment is an actual tax point only if before the basic tax point. D is wrong — invoice is an actual tax point only if issued before the basic tax point or within 14 days after.
Question 236
A company group appoints a representative member for VAT group registration. The effect is:
Select an option first.
Correct answer: B — The group is treated as a single taxable person — intra-group supplies are disregarded for VAT; all group members are jointly and severally liable for the VAT
Explanation: B is correct: in a VAT group, the group is treated as a single taxable entity. Intra-group supplies between members are outside the scope of VAT. All members are jointly and severally liable for the group's VAT. B is correct. A is wrong — a single return is filed. C is wrong — all members are jointly liable. D is wrong — no bank account requirement.
Question 237
SDLT applies to lease transactions. For a new commercial lease with a net present value (NPV) above £150,000:
Select an option first.
Correct answer: C — SDLT at 0% to £150,000 NPV; 1% on NPV £150,001 to £5,000,000; 2% above £5m (in addition to premium SDLT)
Explanation: C is correct: SDLT on commercial leases is charged on the NPV of rents: 0% on the first £150,000; 1% on NPV from £150,001 to £5,000,000; 2% on NPV above £5 million. Any premium is separately chargeable. C is correct. A is wrong — describes only part of the calculation. B is wrong — SDLT does arise. D is wrong — not a flat rate.
Question 238
The tonnage tax election for shipping companies allows companies to:
Select an option first.
Correct answer: B — Pay CT based on a notional profit calculated by reference to the net tonnage of the fleet, rather than actual trading profits
Explanation: B is correct: the tonnage tax regime allows qualifying shipping companies to pay CT based on a notional daily profit per tonne of net tonnage, rather than their actual trading profits. This provides certainty and may reduce the CT burden. B is correct. A is wrong — CT is still payable. C is wrong — the rate is not a flat 10%. D is wrong — no 10-year deferral.
Question 239
A company has a wholly-owned subsidiary that it has held for 3 years. The subsidiary then makes trading losses. The losses can:
Select an option first.
Correct answer: A — Be surrendered to the parent company via group relief
Explanation: A is correct: within a 75% group, a company can surrender its current-year trading losses to other group companies via group relief. The parent (or another group member) can claim the surrendered losses against its own taxable total profits. A is correct. B is wrong — group relief allows sharing. C is wrong — corporation tax applies to companies. D is wrong — group relief is current-year, not retroactive against parent's prior profits.
Question 240
The domestic minimum top-up tax (DMTT) in the UK from January 2024 is part of the OECD Pillar Two framework and charges:
Select an option first.
Correct answer: B — Large multinationals (€750m+ revenue) an additional top-up tax to ensure an effective tax rate of at least 15% on UK profits, where the normal CT rate results in a lower effective rate
Explanation: B is correct: the UK's DMTT (part of the global minimum tax framework) applies to large multinational groups and ensures their UK entities pay an effective tax rate of at least 15%. Where the standard CT rate (25%) applies in full, the DMTT typically will not apply. B is correct. A is wrong — it is targeted at large multinationals with sub-15% effective rates. C is wrong — it applies to large MNEs. D is wrong — it is a CT-type charge.
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