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Free ACCA Taxation Practice Questions & Answers
300 exam-style Taxation questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 271
When a trading loss is carried forward by a company, against what can it be relieved from April 2017?
Select an option first.
Correct answer: B — Against total profits of the company (including non-trading income and gains), subject to the deductions allowance
Explanation: B is correct. Under the post-April 2017 rules, trading losses carried forward can be set against a company's total profits (not just trading profits of the same trade). However, for large companies, a deductions allowance of £5 million applies — losses above this cap cannot reduce profits by more than 50% in any period. A is the pre-2017 rule. C describes group relief. D is incorrect.
Question 272
What is the de minimis limit for the deductions allowance on loss carry-forwards for large companies?
Select an option first.
Correct answer: B — £5 million
Explanation: B is correct. The deductions allowance is £5 million per group (or standalone company). Below this amount, carried-forward losses can be used without restriction. Above £5 million, losses can only offset 50% of remaining profits. A, C and D use incorrect amounts.
Question 273
What is an impairment loss on a trade debt and is it allowable for corporation tax?
Select an option first.
Correct answer: B — An allowable deduction when a trade debt is genuinely impaired (i.e., the likelihood of recovery is in doubt), provided it is specific to an identifiable debt
Explanation: B is correct. Specific impairment of trade debts (amounts owed by trade customers that may not be recovered) is allowable for corporation tax. General provisions (e.g., a flat 5% of all debtors) are not allowable. A is incorrect. C and D impose conditions that are not part of the tax rules.
Question 274
What is the loan relationship regime?
Select an option first.
Correct answer: B — The corporation tax rules under which all interest income, interest expense, and other items relating to financial instruments are brought into account on an accruals basis
Explanation: B is correct. The loan relationship rules require companies to bring all debits and credits from money debts (including interest, discounts, premiums and exchange differences) into the corporation tax computation on an accruals basis, matching the accounting treatment. A, C and D are incorrect.
Question 275
In VAT, what is a 'reverse charge'?
Select an option first.
Correct answer: B — A mechanism where the recipient of a supply (rather than the supplier) accounts for the VAT — used for cross-border B2B services and in domestic sectors like construction
Explanation: B is correct. The reverse charge shifts the VAT accounting obligation from the supplier to the customer. It applies to cross-border B2B services (where the customer accounts for both output and input VAT on their own return) and domestically in sectors like construction (to combat VAT fraud). A, C and D are incorrect descriptions.
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Question 276
What is the domestic reverse charge for construction services?
Select an option first.
Correct answer: B — A VAT mechanism where the customer (if VAT-registered and CIS-registered) accounts for the VAT on construction services received, rather than the contractor
Explanation: B is correct. Since March 2021, the domestic reverse charge applies to most construction services within the CIS (Construction Industry Scheme). Instead of the contractor charging VAT, the customer accounts for both output and input VAT. This eliminates missing trader fraud. A, C and D are incorrect.
Question 277
What is the VAT fuel scale charge?
Select an option first.
Correct answer: B — A fixed charge used by businesses to account for output VAT on private fuel provided to employees, based on the vehicle's CO2 emissions
Explanation: B is correct. When a business provides fuel for private use in a company car, it must account for output VAT using the fuel scale charge — a fixed quarterly amount based on the car's CO2 emissions. Alternatively, the business can restrict input VAT recovery to business fuel only. A, C and D are incorrect.
Question 278
What is the VAT treatment of a business that sells a mixture of standard-rated and zero-rated goods?
Select an option first.
Correct answer: B — Both types of supply count toward the registration threshold; input VAT on costs relating to both types can generally be recovered
Explanation: B is correct. Zero-rated supplies are taxable supplies (even though the rate is 0%). They count toward the registration threshold. Since they are taxable, the business can recover input VAT on all costs (attributable to both standard and zero-rated supplies). D is also partially correct but B is the more complete and precise answer. A and C are incorrect.
Question 279
What is the penalty for a company that files its corporation tax return late by 3 months?
Select an option first.
Correct answer: B — £100 fixed penalty plus an additional £200 penalty
Explanation: B is correct. The CT late filing penalties are: £100 for up to 3 months late; £200 for more than 3 months late (cumulative: £100 + £200 = £300). For returns more than 6 months late, a tax-geared penalty of 10% of unpaid tax applies. A states only the first penalty. C and D are incorrect.
Question 280
What is the VAT error correction threshold below which errors can be corrected on the next VAT return?
Select an option first.
Correct answer: B — £10,000 net error, or 1% of VAT return turnover up to a maximum of £50,000
Explanation: B is correct. Businesses can correct net errors on previous VAT returns (without separately reporting to HMRC) if the net error does not exceed £10,000, or if it exceeds £10,000 but is less than 1% of the VAT return turnover (Box 6), subject to a £50,000 cap. Larger errors must be separately disclosed to HMRC on form VAT652. A uses an incorrect threshold. C and D are incorrect.
Question 281
What are the main VAT consequences of a transfer of a going concern (TOGC)?
Select an option first.
Correct answer: B — The transfer is outside the scope of VAT — no VAT is charged, provided the purchaser continues the same kind of business and is VAT-registered or immediately becomes so
Explanation: B is correct. A TOGC is outside the scope of VAT if the conditions are met: the purchaser takes over the business as a going concern, continues the same kind of activity, is VAT-registered (or registers as a result), and where opted property is involved, the purchaser has also opted to tax. A, C and D are incorrect.
Question 282
What is the partial exemption standard method?
Select an option first.
Correct answer: B — Input VAT directly attributable to taxable supplies is recoverable; input VAT directly attributable to exempt supplies is not; residual input VAT is apportioned based on the ratio of taxable supplies to total supplies
Explanation: B is correct. The standard method for partial exemption has three stages: (1) directly attributable taxable input VAT = fully recoverable; (2) directly attributable exempt input VAT = not recoverable; (3) residual input VAT apportioned by the taxable turnover / total turnover ratio. A, C and D are incorrect descriptions.
Question 283
A VAT-registered business issues a credit note to a customer for returned goods. What is the VAT effect?
Select an option first.
Correct answer: B — The business reduces its output VAT by the VAT shown on the credit note, and the customer reduces their input VAT claim
Explanation: B is correct. When a VAT credit note is issued (e.g., for returned goods or a price reduction), the supplier reduces their output VAT liability and the customer must reduce their input VAT claim. This is the correct mechanism for adjusting previously invoiced VAT. A, C and D are incorrect.
Question 284
What is the capital goods scheme (CGS) interval for land and buildings?
Select an option first.
Correct answer: B — 10 years
Explanation: B is correct. Under the CGS, the adjustment interval for land, buildings, and civil engineering works (where the VAT-exclusive value exceeds £250,000) is 10 years. For computers and other electronic/electrical equipment (over £50,000), the interval is 5 years. A describes the computer interval. C and D are incorrect.
Question 285
What does 'option to tax' on commercial property allow a landlord to do?
Select an option first.
Correct answer: B — Charge standard rate VAT on rents (normally exempt), enabling recovery of input VAT on property-related costs
Explanation: B is correct. The option to tax converts an otherwise exempt supply of commercial land/property into a standard-rated supply. This allows the landlord to charge VAT on rents and recover input VAT on related costs (e.g., refurbishment, professional fees). A uses wrong rate. C and D are unrelated.
Question 286
Which of the following correctly describes VAT on business entertainment of overseas customers?
Select an option first.
Correct answer: B — Input VAT is recoverable on entertainment provided to overseas customers, as an exception to the general block on business entertainment
Explanation: B is correct. The business entertainment input VAT block applies to UK customers and contacts. Entertainment of overseas customers (from outside the UK) is an exception — input VAT can be recovered on genuine entertaining of overseas customers. A is incorrect for this specific exception. C and D are incorrect.
Question 287
What is the VAT 'time of supply' for a continuous supply of services (e.g., monthly management fees)?
Select an option first.
Correct answer: B — At each point a VAT invoice is issued or payment received, whichever is earlier, within limits set by the 14-day rule
Explanation: B is correct. For continuous supplies of services (such as management fees, rent, or subscriptions), the tax point arises at each invoice or payment point, whichever is earlier. HMRC also permits VAT invoicing in advance at regular intervals for predictable recurring services. A, C and D are incorrect.
Question 288
What is the interaction between capital allowances and depreciation in a company's corporation tax computation?
Select an option first.
Correct answer: B — Depreciation must be added back to accounting profits and capital allowances are deducted instead when computing taxable trading profits
Explanation: B is correct. This is a fundamental adjustment in the corporation tax computation. Accounting depreciation is not allowable for tax — it must be added back. Capital allowances (AIA, WDA, FYA) are the statutory tax equivalent. The net effect: company starts with accounting profit, adds back depreciation, deducts capital allowances. A and C are incorrect. D has no basis in law.
Question 289
A company receives a bank loan. The interest accrued in the accounting period is £15,000 but only £10,000 was paid. How much is deductible for corporation tax?
Select an option first.
Correct answer: B — £15,000 — the full accrued interest is deductible under the loan relationship rules
Explanation: B is correct. Under the loan relationship rules, interest is brought into account on an accruals basis — matching the accounting treatment. The full £15,000 accrued in the period is deductible, regardless of when it was actually paid. A describes the cash basis (which does not apply to companies). C and D are incorrect.
Question 290
What is the rate of interest HMRC charges on overdue corporation tax?
Select an option first.
Correct answer: B — A rate set by HMRC (currently around 7.25% in 2025/26), applied from the payment due date
Explanation: B is correct. HMRC charges interest on overdue tax at the official rate, which is based on the Bank of England base rate plus a margin (currently around 7.25%). Interest accrues from the payment due date. Businesses can also receive interest (at a lower rate) on overpaid tax. A uses the wrong formula. C and D are incorrect.
Question 291
Which of the following is a non-trading loan relationship debit (NTLRD)?
Select an option first.
Correct answer: B — Interest on a loan used to purchase shares in a subsidiary company
Explanation: B is correct. Interest on a loan to purchase shares in a subsidiary is a non-trading loan relationship debit — because the investment is not part of the trading activity of the company. Trading loan relationship debits (e.g., interest on trade finance) are set against trading profits. Non-trading debits are set against non-trading income or can be group-relieved. A is a trading debit. C and D are different items.
Question 292
How does HMRC determine whether a transaction is within a VAT group but with an external third party for VAT purposes?
Select an option first.
Correct answer: B — Transactions between VAT group members are ignored; transactions with parties outside the VAT group are subject to normal VAT rules, with the representative member accounting for all external VAT
Explanation: B is correct. In a VAT group, the representative member files a single VAT return covering all external transactions of the group. Intra-group supplies are disregarded. External supplies (to/from parties outside the group) follow normal VAT rules. A, C and D are incorrect.
Question 293
What is the corporation tax treatment of a company's expenditure on entertaining its own employees (staff parties)?
Select an option first.
Correct answer: B — Allowable as a business expense, provided it does not exceed £150 per employee per year (otherwise the full amount per that employee may be disallowed)
Explanation: B is correct. Staff entertainment is generally allowable as a business expense for corporation tax, unlike customer entertainment which is always disallowed. However, if a staff event costs more than £150 per head (the income tax trivial benefit boundary), the income tax and NIC implications for employees should be considered — but for corporation tax, it remains a deductible trading expense. A is wrong. C uses an incorrect limit. D is incorrect.
Question 294
What is the General Anti-Abuse Rule (GAAR) and when does it apply?
Select an option first.
Correct answer: B — A rule allowing HMRC to counteract tax advantages arising from arrangements that are abusive — those that cannot reasonably be regarded as a reasonable course of action
Explanation: B is correct. The GAAR applies where a tax arrangement is 'abusive' — i.e., it cannot reasonably be regarded as a reasonable course of action in relation to the relevant tax provisions. HMRC can counteract the tax advantage. The GAAR does not apply to straightforward tax planning. A, C and D are incorrect descriptions.
Question 295
What is the disclosure of tax avoidance schemes (DOTAS) regime?
Select an option first.
Correct answer: B — A requirement for promoters and users of notifiable tax schemes to disclose details to HMRC within set time limits, receiving a scheme reference number
Explanation: B is correct. DOTAS requires promoters of notifiable tax avoidance schemes (those meeting certain 'hallmarks' of aggressive planning) to register the scheme with HMRC within 5 days of it becoming available. Users must also disclose their use of the scheme. The scheme reference number is then entered on tax returns. A, C and D are incorrect descriptions.
Question 296
What is the VAT position on professional services supplied by a UK firm to an overseas business (B2B)?
Select an option first.
Correct answer: B — Outside the scope of UK VAT — the place of supply is where the customer belongs (the customer's country)
Explanation: B is correct. Under the general B2B place of supply rules for services, the place of supply is where the customer belongs. If the customer is an overseas business, the supply is outside the scope of UK VAT. The customer self-accounts for any local VAT in their own jurisdiction under the reverse charge. A and D are incorrect. C describes goods exports, not the services mechanism.
Question 297
What is the rate of penalty for deliberate and concealed tax errors on a corporation tax return?
Select an option first.
Correct answer: C — Up to 100% of the potential lost revenue
Explanation: C is correct. HMRC's penalty regime for inaccuracies in tax returns is behaviour-based: careless = up to 30%; deliberate but not concealed = up to 70%; deliberate and concealed = up to 100% of the potential lost revenue. Reductions apply for prompted or unprompted disclosures. A and B apply to less serious categories of behaviour. D is incorrect.
Question 298
A company's chargeable accounting period runs from 1 January 2025 to 31 December 2025. When is the corporation tax due for a non-large company?
Select an option first.
Correct answer: B — 1 October 2026
Explanation: B is correct. Non-large companies pay corporation tax 9 months and 1 day after the end of the accounting period. For a 31 December 2025 year end: 9 months = 30 September 2026, plus 1 day = 1 October 2026. A is the year end itself. C and D use incorrect deadlines.
Question 299
What is the VAT treatment of insurance premiums paid by a UK business?
Select an option first.
Correct answer: B — Exempt from VAT — insurance is an exempt financial service
Explanation: B is correct. Insurance services are VAT exempt in the UK. This means the insurance company does not charge VAT on premiums, but also cannot recover input VAT on its own costs (partial exemption issues arise for insurers). For the business paying the premium, there is no input VAT to recover. A, C and D are incorrect.
Question 300
What is the purpose of the senior accounting officer (SAO) regime for large companies?
Select an option first.
Correct answer: B — To require a senior finance officer of a qualifying large company to take personal responsibility for ensuring the company has appropriate tax accounting arrangements and to certify this annually to HMRC
Explanation: B is correct. The SAO regime requires the most senior finance officer (CFO or equivalent) of a qualifying large company to certify annually that the company has appropriate tax accounting arrangements in place. Failure to comply or certify correctly results in personal penalties of £5,000. A, C and D are incorrect descriptions.
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