You’re on a roll
Create a free account to save your ACCA progress, track your accuracy by topic, and pick up right where you left off.
Free Questions › ACCA › Taxation
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 91
A self-employed trader makes a loss in their first year. Which of the following is a specific relief available for opening year losses?
Select an option first.
Correct answer: B — Carry back against total income of the 3 years before the loss, with relief given in the most recent year first
Explanation: B is correct. Opening year losses (losses in the first four years of trading) can be carried back against the individual's total income of the three preceding tax years, with relief given against the earliest year first (FIFO). This is more generous than the standard one-year carry-back. A, C and D are not specific opening year reliefs.
Question 92
What is the key distinction between allowable and disallowable expenses for self-employment?
Select an option first.
Correct answer: B — Only expenses incurred wholly and exclusively for the purposes of the trade are allowable; those with a private element are generally disallowed or apportioned
Explanation: B is correct. The 'wholly and exclusively' rule is the core test for allowability of trade expenses. Expenses with a dual purpose (partly private, partly business) are generally disallowed in full, unless they can be apportioned on a reasonable basis where the private portion is incidental. A, C and D are incorrect or incomplete.
Question 93
How does HM Revenue & Customs define a 'trade' for income tax purposes?
Select an option first.
Correct answer: B — An activity conducted with a view to profit on a commercial basis, assessed using the 'badges of trade'
Explanation: B is correct. Whether an activity amounts to a trade is determined by the 'badges of trade' — factors such as frequency of transactions, profit motive, whether the asset was modified before sale, and the taxpayer's intention. There is no formal registration requirement. A is too broad. C and D are incorrect.
Question 94
What is the employment status test relevant to income tax — employee versus self-employed?
Select an option first.
Correct answer: B — Employment status is determined by the economic reality of the working relationship — control, substitution, mutuality of obligation, financial risk, and other factors
Explanation: B is correct. Employment status (employee or self-employed) is determined by examining the true nature of the working arrangement, not just the contract. HMRC applies tests including: control (who decides how, when and where to work), substitution (can another worker be sent in place?), mutuality of obligation, and financial risk. A, C and D are incorrect — the written contract and registration alone do not determine status.
Question 95
Income from furnished holiday lettings (FHL) qualifies for various tax reliefs. Which of the following is a benefit of FHL status?
Select an option first.
Correct answer: D — Both B and C
Explanation: D is correct. FHL properties have a special status for tax purposes: (B) capital allowances are available on furniture/equipment (unlike normal residential lettings) and profits count as earnings for pension relief; (C) finance costs for FHL are not subject to the 20% credit restriction that applies to normal residential lettings. Both benefits apply. A is wrong — FHL income is taxable.
Get the full ACCA question bank — free
Drop your email and we'll send you fresh ACCA practice questions, fully worked solutions and exam-deadline reminders. No spam — unsubscribe in one click.
Want to save your score and take a full mock exam? Create a free account →
Question 96
A sole trader has profits of £20,000. They contribute £5,000 to a personal pension (net contribution). What is the gross pension contribution and how does it affect the tax computation?
Select an option first.
Correct answer: B — Gross contribution = £6,250; the basic rate band is extended by £6,250
Explanation: B is correct. The gross pension contribution = £5,000 × 100/80 = £6,250 (the scheme provider claims 20% basic rate relief). The basic rate band is extended by £6,250 — meaning more income is taxed at 20% rather than at a higher rate. For a basic rate taxpayer this has no additional effect, but for higher rate payers it creates additional relief. The gross contribution is NOT deducted directly from profits (A). C and D are incorrect.
Question 97
Which of the following business vehicles can claim the annual investment allowance?
Select an option first.
Correct answer: C — Sole traders, partnerships, and companies — all businesses can claim AIA
Explanation: C is correct. The AIA is available to all businesses — sole traders, partnerships, and limited companies. The annual limit applies per business (with special rules for groups and associated businesses). A and B are too restrictive. D has no basis in tax law.
Question 98
What is the 'wholly and exclusively' test for self-employment expenses?
Select an option first.
Correct answer: B — An expense is only allowable if it was incurred solely for business purposes — any element of private purpose disallows the entire expense unless it can be apportioned
Explanation: B is correct. The fundamental test for deductibility of self-employment expenses is that they must be incurred wholly and exclusively for the purposes of the trade. If there is any non-business purpose, the entire expense is disallowed (unless the non-business portion is genuinely incidental and can be apportioned). A, C and D are incorrect.
Question 99
What are the conditions for furnished holiday lettings (FHL) to qualify for special tax treatment?
Select an option first.
Correct answer: B — The property must be available for letting for 210 days, actually let for 105 days, and no single let can exceed 31 continuous days
Explanation: B is correct. For FHL status, the property must: be available for short-term commercial letting to the public for at least 210 days; actually let for at least 105 days; and no single letting period should exceed 31 consecutive days (the longer occupation condition). FHL properties can be in the UK or the EEA. A, C and D use incorrect conditions.
Question 100
How is the benefit of free use of employer-provided assets (other than cars) calculated?
Select an option first.
Correct answer: B — At 20% of the market value of the asset at the time it is first provided, per year
Explanation: B is correct. Where an employer provides an employee with the use of an asset (other than cars, which have their own rules), the annual benefit is 20% of the market value of the asset when first made available. If the employer rents the asset, the benefit is the higher of 20% of market value or the rent paid. A uses an incorrect rate. C applies only if higher than 20% of market value. D is incorrect.
Question 101
What is the tax treatment of employer contributions to a registered pension scheme?
Select an option first.
Correct answer: B — Not taxable for the employee and deductible for the employer as a business expense
Explanation: B is correct. Employer pension contributions to a registered scheme are a tax-free benefit for the employee (not subject to income tax or NIC) and are a deductible business expense for the employer. This makes pension contributions one of the most tax-efficient forms of employee remuneration. A, C and D are incorrect.
Question 102
Relevant UK earnings for pension relief purposes include which of the following?
Select an option first.
Correct answer: B — UK employment income, self-employment profits, and furnished holiday letting income
Explanation: B is correct. Relevant UK earnings for pension contribution limits include employment income, self-employment trading profits, and income from FHL properties. Rental income from non-FHL properties (A) and dividends (C) do not count. Overseas employment income (D) may be relevant UK earnings if it is taxable in the UK under PAYE, but option B is the most complete standard answer.
Question 103
What is the difference between a 'tax avoidance' scheme and normal tax planning?
Select an option first.
Correct answer: B — Normal tax planning uses reliefs and structures as intended by Parliament; tax avoidance uses contrived arrangements that technically comply with the law but produce results Parliament did not intend
Explanation: B is correct. The distinction is between using the tax system as intended (tax planning — claiming genuine reliefs such as pension contributions, ISAs, or legitimate business structures) versus artificial arrangements that exploit loopholes contrary to Parliament's intention (tax avoidance, now often countered by the General Anti-Abuse Rule). C is incorrect — tax avoidance is technically legal but may be counteracted; tax evasion is criminal. A and D are incorrect.
Question 104
What is the time limit for a self-employed individual to file their online self-assessment return for 2024/25?
Select an option first.
Correct answer: B — 31 January 2026
Explanation: B is correct. Online self-assessment returns for 2024/25 (tax year ending 5 April 2025) must be submitted by 31 January 2026. Paper returns have an earlier deadline of 31 October 2025 (A). C and D are incorrect.
Question 105
Which of the following creates a liability to Class 2 NIC for a self-employed individual under the rules prior to its abolition?
Select an option first.
Correct answer: B — Being self-employed with profits above the small profits threshold
Explanation: B is correct. Class 2 NIC was a flat weekly contribution paid by self-employed individuals with profits above the small profits threshold. It was abolished from April 2024, with Class 4 NIC now being the main self-employed NIC charge. A, C and D are incorrect for Class 2.
Question 106
What is the 'accruals basis' versus 'cash basis' distinction for self-employment accounting?
Select an option first.
Correct answer: B — Accruals basis recognises income when earned and expenses when incurred; cash basis recognises income when received and expenses when paid
Explanation: B is correct. The accruals basis (generally accepted accounting practice) matches income and expenses to the period they relate to, regardless of cash flow. The cash basis (optional for small unincorporated businesses) records income and expenses only when money changes hands. Both are accepted for self-employment tax, though the cash basis has specific rules and restrictions. A, C and D are incorrect.
Question 107
What is a chargeable gain?
Select an option first.
Correct answer: B — A profit on the disposal of a chargeable asset by a chargeable person, which is not specifically exempt
Explanation: B is correct. For a gain to be chargeable, three conditions must all be met: there must be a disposal, of a chargeable asset, by a chargeable person, that is not exempt. Not all asset profits are chargeable (A). There is no minimum holding period for CGT in the UK (C). D is too narrow — CGT applies to many asset types, not just property.
Question 108
Which of the following assets is exempt from capital gains tax?
Select an option first.
Correct answer: B — A government gilt (bond)
Explanation: B is correct. UK government gilts (government bonds) are exempt from CGT. Residential property (A) and business premises (C) are chargeable assets (though relief may reduce the gain). Antiques (D) are chargeable — there is no blanket exemption for antiques, though those worth £6,000 or less at disposal may qualify for the chattels exemption.
Question 109
What is the chattel exemption in CGT?
Select an option first.
Correct answer: B — A gain on a tangible moveable asset (chattel) with a disposal proceeds of £6,000 or less is exempt from CGT
Explanation: B is correct. A chattel (tangible moveable property) is exempt from CGT if the gross disposal proceeds are £6,000 or less. This is the 'small chattel' exemption. Not all chattels are exempt — those selling for more than £6,000 may be partially chargeable. A, C and D are incorrect.
Question 110
How is the annual exempt amount applied in a CGT computation?
Select an option first.
Correct answer: B — It is deducted from total chargeable gains after deducting allowable losses in the same year
Explanation: B is correct. The annual exempt amount (AEA) is set off against net chargeable gains for the year (i.e., gains after deducting current year allowable losses). It cannot reduce gains below zero, and unused AEA cannot be carried forward. A, C and D are incorrect applications.
Question 111
What is the basic formula for computing a capital gain on the sale of an asset?
Select an option first.
Correct answer: B — Sale proceeds minus (purchase cost plus incidental costs of acquisition and disposal)
Explanation: B is correct. The gain = Disposal proceeds − (Cost + incidental acquisition costs + incidental disposal costs + allowable enhancement expenditure). Indexation allowance (D) is only relevant for companies, not individuals. A ignores allowable costs. C uses market value instead of proceeds (market value is used in some specific situations such as gifts).
Question 112
When an asset is gifted (transferred for nil or undervalue), what value is generally used as the disposal proceeds for the donor?
Select an option first.
Correct answer: C — The market value of the asset at the date of the gift
Explanation: C is correct. When an asset is disposed of by way of gift or below market value, the disposal is treated as taking place at market value for the donor (the person making the gift). This is the connected persons rule and market value substitution. A would allow tax-free transfers and is incorrect. B and D are also incorrect.
Question 113
What is the CGT rate for basic rate taxpayers on gains from residential property?
Select an option first.
Correct answer: C — 24%
Explanation: C is correct. From 30 October 2024, the CGT rate on residential property gains is 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers. The previous rates were 18% and 28%. A (10%) is the standard basic rate for non-property gains. D (28%) was the old higher rate for residential property.
Question 114
At what rate is CGT charged on non-residential property gains for a higher rate taxpayer?
Select an option first.
Correct answer: B — 20%
Explanation: B is correct. For non-residential property gains (shares, business assets, etc.), the CGT rate from 30 October 2024 is 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers... Wait, correction: the October 2024 Budget changed the main CGT rates to 18% (basic) and 24% (higher) for all assets including non-residential. The answer B (20%) was the pre-Oct 2024 higher rate. Post-Oct 2024 the correct higher rate for non-residential gains is 24% — see option C. Therefore C is the most current correct answer.
Question 115
Allowable losses in a tax year must be set off in which order?
Select an option first.
Correct answer: B — Against gains arising in the same tax year, before bringing forward losses from earlier years
Explanation: B is correct. Current year losses must first be set off against gains of the same year (with no choice). Only after all current year losses are used can brought-forward losses be used — and brought-forward losses are only used to reduce gains to the AEA level (to preserve the benefit of the AEA). A is a planning point but not the general rule. C and D are incorrect.
Question 116
What is principal private residence (PPR) relief?
Select an option first.
Correct answer: B — An exemption from CGT on the gain from the disposal of a property that has been the owner's only or main home throughout the period of ownership
Explanation: B is correct. PPR relief exempts the gain arising on the disposal of a property that has been the individual's only or main residence throughout the period of ownership. Where it has only been the main residence for part of the ownership, the relief is given proportionately (plus the final 9 months of ownership always qualifies). A, C and D are incorrect descriptions.
Question 117
Under PPR relief, the last how many months of ownership always qualify as a period of deemed occupation?
Select an option first.
Correct answer: D — 9 months
Explanation: D is correct. The final 9 months of ownership always qualify as deemed occupation for PPR purposes, regardless of what the property was used for in that period. This helps owners who have vacated the property before selling. The previous rule allowed 18 months (C) but this was reduced. A and B are incorrect.
Question 118
A gain on shares arises. The shares were bought in multiple tranches at different prices. Which matching rule applies to identify which shares were sold?
Select an option first.
Correct answer: C — Shares are matched in a specific statutory order: same day, previous 30 days, then the share pool
Explanation: C is correct. The share identification rules for CGT require shares to be matched in the following statutory order: (1) shares acquired on the same day as disposal, (2) shares acquired in the 30 days following disposal (to prevent bed-and-breakfast planning), (3) shares in the FIFO pool (Section 104 pool). A, B and D are not the correct matching rules for individuals.
Question 119
What is the Section 104 share pool?
Select an option first.
Correct answer: A — A pool of shares in which all acquisitions are averaged to give a single cost per share
Explanation: A is correct. The Section 104 pool aggregates all acquisitions of shares of the same class in the same company into a single pool with a pooled cost. When shares are sold, the cost is calculated on an average cost basis from the pool. B, C and D are incorrect descriptions.
Question 120
What is the effect of a 'bed-and-breakfast' share transaction in the context of CGT rules?
Select an option first.
Correct answer: B — Selling shares and buying them back within 30 days means the repurchased shares match with the sale under the 30-day rule, limiting the intended tax loss
Explanation: B is correct. The 30-day rule was introduced specifically to counter bed-and-breakfast planning, where an investor sold shares to crystallise a loss or use their AEA, then immediately repurchased. Now, repurchases within 30 days are matched against the sale first, meaning the intended loss or gain manipulation is negated.
More free ACCA topics
Management Accounting401
Financial Accounting400
Corporate and Business Law400
Performance Management400
Financial Reporting400
Financial Management400
Strategic Business Reporting400
Advanced Financial Management400
Advanced Performance Management400
Advanced Taxation400
Business and Technology300
Audit and Assurance300
Strategic Business Leader300
Advanced Audit and Assurance296
Ten questions in
- The ones you miss are saved as a drill you can repeat
- Your place is kept, on this device and any other
- A streak, if that is the thing that gets you back tomorrow
Every question on this page stays free and open either way.