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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 181
Gift hold-over relief and rollover relief — what is the key difference?
Select an option first.
Correct answer: B — Rollover relief defers a gain into a replacement business asset; hold-over relief transfers the gain to the recipient of a gift by reducing their base cost
Explanation: B is correct. The key distinction: rollover relief defers a gain by rolling it into the cost of a new qualifying asset (same person, different asset). Hold-over relief transfers the gain to the recipient of the gift (different person, same asset, reduced base cost). A, C and D are incorrect.
Question 182
Which of the following is a qualifying asset for rollover relief?
Select an option first.
Correct answer: B — A freehold factory used in the trade
Explanation: B is correct. Qualifying assets for rollover relief include land and buildings, fixed plant and machinery used in the trade, goodwill, ships, aircraft, satellites, spacecraft, hovercraft, and milk and potato quotas. Quoted shares (A) and domestic property (D) do not qualify. Personal goodwill (C) may qualify in some circumstances for a sole trader.
Question 183
What is the difference between BPR and APR?
Select an option first.
Correct answer: B — BPR reduces the IHT value of qualifying business property; APR reduces the IHT value of qualifying agricultural property — they serve similar functions for different asset types
Explanation: B is correct. BPR and APR both reduce the chargeable value of qualifying property for IHT. BPR applies to business property (sole trades, unquoted shares, etc.) and APR applies to agricultural property (farmland, farm buildings, farmhouses). Both can give 100% or 50% relief depending on the type. A, C and D are incorrect.
Question 184
What is the interaction between CGT and IHT on death?
Select an option first.
Correct answer: B — There is no CGT on assets at the date of death — assets are inherited at market value (uplift in base cost), and IHT may be charged on the estate
Explanation: B is correct. On death, there is no CGT charge. Instead, the beneficiary inherits the asset at its market value at the date of death (this is the CGT-free uplift). IHT may be charged on the estate value. The combination of IHT exemption (via nil rate band etc.) and the CGT uplift on death is significant in estate planning. A, C and D are incorrect.
Question 185
What is the IHT position for gifts between individuals (PETs) where the donor dies 8 years later?
Select an option first.
Correct answer: B — The PET is fully exempt — the donor survived 7 years so the gift is outside the estate
Explanation: B is correct. A PET becomes fully exempt from IHT if the donor survives 7 years from the date of the gift. Eight years after the gift, the PET is completely outside the estate for IHT purposes. A, C and D apply to deaths within 7 years of the gift.
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Question 186
What is a 'connected person' for CGT purposes, and why does it matter?
Select an option first.
Correct answer: B — Spouses, civil partners, relatives and their spouses — disposals to connected persons are treated as being at market value, preventing artificial loss creation
Explanation: B is correct. Connected persons include: spouses/civil partners, lineal ancestors and descendants, siblings, and spouses/civil partners of those relatives. When an asset is sold or given to a connected person, it is treated as disposed of at market value (not the actual consideration). This prevents artificial loss creation between family members. A, C and D are too narrow or incorrect.
Question 187
When calculating a CGT loss on a sale to a connected person, what special rule applies?
Select an option first.
Correct answer: B — The loss can only be set against gains arising from disposals to the same connected person
Explanation: B is correct. Losses arising from disposals to connected persons are 'ring-fenced' — they can only be set against gains from disposals to the same connected person in the current or future years. They cannot be offset against gains from unconnected disposals. A and C are incorrect for connected person losses. D is incorrect.
Question 188
An individual claims BADR on a qualifying business disposal. Their total lifetime gains on BADR claims so far amount to £800,000. They now have a qualifying gain of £500,000. How much BADR is available on this disposal?
Select an option first.
Correct answer: B — BADR on £200,000 only — the remaining lifetime limit is £1,000,000 − £800,000 = £200,000
Explanation: B is correct. The BADR lifetime limit of £1,000,000 is cumulative across all qualifying disposals in the taxpayer's lifetime. With £800,000 already claimed, only £200,000 remains. The gain of £500,000 attracts BADR on £200,000 (taxed at 10%) and the remaining £300,000 is taxed at standard CGT rates. A and D misunderstand the lifetime nature. C is wrong — the limit is not yet exhausted.
Question 189
What is the CGT base cost of an asset inherited on death?
Select an option first.
Correct answer: B — The market value of the asset at the date of death
Explanation: B is correct. Assets inherited on death are treated as acquired by the beneficiary at the market value at the date of death (the probate value). This is the CGT-free uplift on death — any gain accrued during the deceased's lifetime is wiped out. A, C and D are incorrect.
Question 190
A person makes a PET of £200,000 in June 2018 and dies in August 2024. The nil rate band is £325,000 and no previous CLTs were made. Is the PET chargeable?
Select an option first.
Correct answer: C — Yes, with 60% taper relief as death was between 6 and 7 years
Explanation: C is correct. The donor died in August 2024, approximately 6 years and 2 months after the June 2018 gift. This falls in the 6–7 year taper relief band, so 60% taper relief applies to any IHT. However, the PET of £200,000 is below the £325,000 nil rate band, so no IHT is actually payable regardless of taper. C correctly identifies the applicable taper band even though no tax arises. B is wrong — it is within 7 years. D is incorrect.
Question 191
What is the residence nil rate band (RNRB) for 2025/26?
Select an option first.
Correct answer: C — £175,000
Explanation: C is correct. The RNRB is currently £175,000 per individual. When combined with the standard NRB of £325,000, a qualifying estate can have up to £500,000 before IHT applies (or £1 million for a surviving spouse using both transferable NRB and RNRB). A and B are earlier, lower amounts. D has not yet been reached.
Question 192
Which entities are subject to corporation tax in the UK?
Select an option first.
Correct answer: C — UK resident companies and non-UK resident companies with a UK permanent establishment
Explanation: C is correct. Corporation tax applies to UK-resident companies on their worldwide profits, and to non-resident companies on profits arising from UK activities through a permanent establishment. Sole traders (A) pay income tax, not corporation tax. B is too narrow — all companies (listed or not) pay corporation tax. D is incorrect — unincorporated businesses pay income tax.
Question 193
What is the accounting period for corporation tax purposes?
Select an option first.
Correct answer: C — The period for which a company prepares its statutory accounts, but no longer than 12 months
Explanation: C is correct. A company's accounting period for corporation tax broadly follows its financial year, but cannot exceed 12 months. If accounts are drawn up for more than 12 months, two separate accounting periods apply. A and D are incorrect. B ignores the 12-month maximum.
Question 194
What is the main rate of corporation tax for companies with profits above £250,000 in 2025?
Select an option first.
Correct answer: C — 25%
Explanation: C is correct. The main rate of corporation tax is 25% for companies with profits exceeding £250,000. The small profits rate of 19% applies to companies with profits of £50,000 or less. Marginal relief applies between these thresholds. A is the small profits rate. B and D are incorrect.
Question 195
What is the small profits rate of corporation tax?
Select an option first.
Correct answer: A — 19% for companies with annual profits not exceeding £50,000
Explanation: A is correct. The small profits rate of 19% applies to companies with profits of £50,000 or less per year. Above this level, marginal relief tapers toward the main rate of 25%. B, C and D use incorrect rates or thresholds.
Question 196
What is marginal relief for corporation tax?
Select an option first.
Correct answer: B — A tapering calculation that adjusts the effective corporation tax rate for companies with profits between £50,000 and £250,000
Explanation: B is correct. Marginal relief applies to companies with profits between £50,000 and £250,000, ensuring the effective tax rate tapers smoothly from 19% to 25%. The formula: add back (250,000 − augmented profits) × fraction to give the corporation tax adjusted amount. A, C and D are incorrect descriptions.
Question 197
For marginal relief purposes, the profit thresholds are divided by the number of 'associated companies'. What is an associated company?
Select an option first.
Correct answer: B — A company under the control of the same person or persons
Explanation: B is correct. For marginal relief, associated companies are those under common control — broadly, companies controlled by the same person or group. This prevents artificial fragmentation of a business into multiple small companies to benefit from the lower rate. A is too narrow. C is too narrow. D is unrelated.
Question 198
How are dividends received by a UK company from another UK company treated for corporation tax?
Select an option first.
Correct answer: B — Exempt from corporation tax
Explanation: B is correct. Dividends received by a UK company from another UK company are generally exempt from corporation tax, to avoid economic double taxation (the paying company has already paid corporation tax on its profits). A, C and D are incorrect.
Question 199
Which of the following is NOT an allowable deduction in computing a company's trading profits for corporation tax?
Select an option first.
Correct answer: B — Entertaining UK customers
Explanation: B is correct. Entertainment of UK customers is a specific statutory disallowance for both income tax and corporation tax purposes — it cannot be deducted from trading profits. Bad debts (A), staff costs (C), and business rent (D) are all allowable deductions.
Question 200
What is the difference between a capital allowance and a depreciation charge for corporation tax?
Select an option first.
Correct answer: B — Depreciation is an accounting charge that must be added back; capital allowances are the tax-allowable equivalent
Explanation: B is correct. Depreciation charged in the accounts is not an allowable deduction for tax. It must be added back in the tax computation. Capital allowances (AIA, WDA etc.) are the statutory equivalent allowed under tax law. This is a key adjustment in moving from accounting profit to taxable profit.
Question 201
When must a company pay corporation tax if it is not a large company?
Select an option first.
Correct answer: A — Within 9 months and 1 day of the end of the accounting period
Explanation: A is correct. Non-large companies must pay their corporation tax liability by 9 months and 1 day after the end of the accounting period. Large companies pay by quarterly instalments. A is the correct non-large company deadline. B is the income tax self-assessment deadline. C and D are incorrect.
Question 202
When must a company file its corporation tax return (CT600)?
Select an option first.
Correct answer: B — Within 12 months of the end of the accounting period
Explanation: B is correct. A company must file its corporation tax return (form CT600) within 12 months of the end of the accounting period. Note: this is later than the payment due date of 9 months + 1 day. A, C and D are incorrect.
Question 203
Loan relationships — how are interest payments treated for a company's corporation tax?
Select an option first.
Correct answer: B — Generally deductible as a trading expense or non-trading debit in the period the interest accrues
Explanation: B is correct. Under the loan relationship rules, a company deducts interest on an accruals basis (when it accrues, not when paid), as a trading debit (for trade loans) or a non-trading debit (for non-trade loans). A, C and D are incorrect.
Question 204
What are 'qualifying charitable donations' for corporation tax purposes?
Select an option first.
Correct answer: B — Cash donations to qualifying charities, deducted from total profits in arriving at taxable total profits
Explanation: B is correct. Qualifying charitable donations (cash donations to qualifying charities made by companies) are deducted from total profits — after trading profits, non-trading profits, and chargeable gains have been aggregated — to arrive at taxable total profits. A describes Gift Aid for individuals. C and D are incorrect.
Question 205
What is a company's 'taxable total profits' (TTP)?
Select an option first.
Correct answer: B — All income and gains less allowable reliefs and qualifying charitable donations
Explanation: B is correct. TTP = Trading profits + Non-trading income (interest, property income, dividends from non-exempt sources) + Chargeable gains − Reliefs (e.g., losses) − Qualifying charitable donations. A is too narrow. C describes accounting revenue. D is an incorrect description.
Question 206
What is the main rate of CGT for companies on chargeable gains?
Select an option first.
Correct answer: C — Companies pay corporation tax (not CGT) on chargeable gains, at the applicable corporation tax rate
Explanation: C is correct. Companies do not pay capital gains tax — they pay corporation tax on their chargeable gains, at whatever corporation tax rate applies to their profits. Chargeable gains are included in TTP. The CGT rates (A, B, D) are for individuals, not companies.
Question 207
A company makes a trading loss. Which of the following is NOT a way to relieve the loss?
Select an option first.
Correct answer: D — Carry across to an associated company in the same period
Explanation: D is correct (i.e., D is NOT an available option). Trading losses cannot be simply transferred to an associated company in the same period — that would require group relief (for group companies, not just associated companies). Trading losses can be: set off against total profits of the same period (A), carried forward against future profits (B), or carried back 12 months (C).
Question 208
What is group relief for corporation tax?
Select an option first.
Correct answer: B — The ability to surrender trading losses from one group company to be offset against profits of another group company in the same period
Explanation: B is correct. Group relief allows a company with a trading loss (the surrendering company) to surrender that loss to another group company (the claimant company) so it can be offset against that company's profits in the same accounting period. A, C and D are incorrect descriptions.
Question 209
For group relief purposes, the minimum shareholding requirement is what?
Select an option first.
Correct answer: B — 75% directly or indirectly
Explanation: B is correct. Group relief requires a 75% relationship — broadly, one company must own at least 75% of the ordinary share capital of the other (directly or through intermediaries). A 50% test (A) is used for different purposes. 90% and 100% (C, D) are too restrictive.
Question 210
When a company has an excess of capital losses, how can they be relieved?
Select an option first.
Correct answer: B — Carried forward indefinitely against future chargeable gains only
Explanation: B is correct. Capital losses for a company can only be set off against chargeable gains — they cannot be set against trading income (A). They must be carried forward (not back — C is wrong) against future gains. Capital losses cannot be group-relieved (D).
More free ACCA topics
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Financial Accounting400
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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
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