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 211
Which of the following correctly describes consortium relief for corporation tax?
Select an option first.
Correct answer: B — Loss relief available where a company is owned by a consortium (5 or more members each owning between 5% and 75%), allowing losses to be surrendered proportionately
Explanation: B is correct. Consortium relief applies where a trading company or holding company is owned by a consortium — where each member owns between 5% and 75% (none owning less than 5%) and together they own 75% or more. Losses can be surrendered between the consortium company and its members pro rata to ownership. A, C and D are incorrect.
Question 212
What is VAT?
Select an option first.
Correct answer: B — A consumption tax charged on the supply of goods and services, collected by businesses on behalf of HMRC
Explanation: B is correct. VAT (Value Added Tax) is an indirect consumption tax charged on taxable supplies of goods and services by VAT-registered businesses. Businesses collect it from customers and pay it to HMRC, deducting input VAT they have paid. A describes corporation tax. C is too narrow. D describes NIC/payroll taxes.
Question 213
What is the compulsory VAT registration threshold based on?
Select an option first.
Correct answer: B — Annual turnover of taxable supplies exceeding the registration threshold
Explanation: B is correct. A business must register for VAT if its taxable turnover (supplies at standard, reduced or zero rate) exceeds the VAT registration threshold in any 12-month rolling period, or if it is expected to exceed the threshold in the next 30 days alone. A, C and D are incorrect.
Question 214
What is the standard rate of VAT in the UK?
Select an option first.
Correct answer: C — 20%
Explanation: C is correct. The standard rate of VAT is 20%. The reduced rate is 5% (applicable to certain items such as domestic fuel and children's car seats). A is the reduced rate. B and D are not UK VAT rates.
Question 215
What is the difference between a zero-rated supply and an exempt supply for VAT purposes?
Select an option first.
Correct answer: B — A zero-rated supply is taxable at 0% and the supplier can recover input VAT; an exempt supply means the supplier cannot recover input VAT on related costs
Explanation: B is correct. This is a critical distinction. Zero-rated supplies are technically taxable (output VAT = £0) so the supplier can reclaim input VAT on costs. Exempt supplies mean no VAT is charged, but the supplier cannot recover input VAT on costs attributable to those supplies. A ignores the input VAT recovery difference. C is wrong on rates. D reverses the examples.
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 216
Which of the following is an example of a zero-rated supply?
Select an option first.
Correct answer: C — Most basic food items
Explanation: C is correct. Most basic food items (but not hot takeaway food, confectionery, crisps, or alcoholic drinks) are zero-rated. Commercial property (A) is standard-rated unless the option to tax is exercised or it is exempt residential. Financial services (B) and insurance (D) are exempt supplies.
Question 217
What does 'output VAT' mean?
Select an option first.
Correct answer: B — The VAT a business charges on its taxable sales
Explanation: B is correct. Output VAT is VAT charged on a business's taxable supplies (sales). It is collected from customers and paid to HMRC. Input VAT (A) is the VAT paid on purchases. C describes a VAT repayment (when input exceeds output). D is too narrow.
Question 218
What does 'input VAT' mean and when can it be recovered?
Select an option first.
Correct answer: B — VAT paid on business purchases, which can generally be reclaimed from HMRC by a VAT-registered business making taxable supplies
Explanation: B is correct. Input VAT is the VAT paid by a business on goods and services it purchases for business use. A VAT-registered business can recover input VAT from HMRC if the related supply is taxable. Business entertainment (D) is specifically blocked from input VAT recovery. A describes output VAT. C is too narrow.
Question 219
VAT on business entertainment is generally:
Select an option first.
Correct answer: B — Not recoverable (blocked input tax)
Explanation: B is correct. Input VAT on entertainment is blocked — it cannot be recovered from HMRC. The only exception is entertainment provided solely to employees (as part of a staff function), where input VAT can be reclaimed. A is a partial exception (employee entertainment). C and D are incorrect.
Question 220
What is the VAT accounting period for most standard-rated businesses?
Select an option first.
Correct answer: C — Quarterly
Explanation: C is correct. The default VAT accounting period is quarterly. Businesses submit a VAT return and make payment every three months. Monthly (B) is available on request (or required for large businesses or those in a repayment position). Annual accounting (A) is an optional scheme for smaller businesses.
Question 221
When must a VAT return and payment be submitted for a quarterly period ending 31 March?
Select an option first.
Correct answer: C — By 7 May
Explanation: C is correct. VAT returns and payments must be submitted online and paid by one calendar month plus 7 days after the end of the VAT period. For a period ending 31 March, the deadline is 7 May. B ignores the 7-day extension for online submission. A is the end of the period itself. D is too late.
Question 222
What is the VAT annual accounting scheme?
Select an option first.
Correct answer: B — A scheme allowing eligible businesses to file one VAT return per year, making 9 interim payments throughout the year
Explanation: B is correct. The annual accounting scheme lets businesses with taxable turnover up to £1.35 million file a single annual VAT return and make 9 monthly interim payments (based on estimated annual liability), with a balancing payment when the annual return is filed. A describes standard monthly filing. C and D are incorrect.
Question 223
What is the VAT cash accounting scheme?
Select an option first.
Correct answer: A — A scheme where VAT is accounted for on cash received and cash paid, rather than on invoices issued and received
Explanation: A is correct. The cash accounting scheme allows businesses to account for output VAT when payment is received from customers, and claim input VAT when payment is made to suppliers (rather than on invoice dates). This provides automatic bad debt relief. B, C and D are incorrect descriptions.
Question 224
What is the VAT flat rate scheme?
Select an option first.
Correct answer: B — A simplified VAT scheme where businesses pay a fixed percentage of their gross (VAT-inclusive) turnover to HMRC, instead of calculating actual output and input VAT
Explanation: B is correct. Under the flat rate scheme, businesses pay a flat percentage (set by HMRC per trade sector) of their gross VAT-inclusive turnover to HMRC. They do not separately account for input VAT (except on certain capital assets over £2,000). This simplifies administration. A confuses the standard 20% rate. C and D are incorrect.
Question 225
What is a taxable person for VAT purposes?
Select an option first.
Correct answer: B — Any business or individual who makes taxable supplies in the course of a business and is, or is required to be, VAT registered
Explanation: B is correct. A taxable person for VAT is any individual, business, or organisation that makes (or intends to make) taxable supplies in the course of business and meets the VAT registration requirements. A is too broad. C is too narrow. D is unrelated to VAT.
Question 226
What is the option to tax for land and property?
Select an option first.
Correct answer: B — A voluntary election by a business to charge standard rate VAT on what would otherwise be an exempt supply of land or commercial property
Explanation: B is correct. The option to tax (also called 'election to waive exemption') allows a business to voluntarily convert an otherwise exempt supply of land or commercial property into a standard-rated supply. This means it can charge and collect VAT on rents or sales and recover input VAT on related costs. Residential property cannot be opted to tax (A is wrong). C and D are incorrect.
Question 227
What is bad debt relief for VAT?
Select an option first.
Correct answer: B — The ability to reclaim output VAT previously paid to HMRC where a customer debt remains unpaid after 6 months
Explanation: B is correct. Bad debt relief allows a VAT-registered business to reclaim VAT it has already paid to HMRC on a supply, where the customer has failed to pay and the debt is over 6 months old. The debt must also have been written off in the accounts. A, C and D are incorrect.
Question 228
A VAT default surcharge applies when a business pays its VAT late. Which statement is correct?
Select an option first.
Correct answer: B — The surcharge increases with each successive default within a 12-month surcharge period, starting at 2% and rising to 15%
Explanation: B is correct. The default surcharge regime (for periods before 1 January 2023) imposes an escalating surcharge: 2%, 5%, 10%, then 15% for each successive default in the surcharge liability period. From 1 January 2023, a points-based penalty system replaced this for most businesses. A, C and D are incorrect under the old regime.
Question 229
Which of the following describes a VAT group?
Select an option first.
Correct answer: B — Two or more companies under common control that elect to be treated as a single VAT entity, with one representative member filing a single VAT return
Explanation: B is correct. A VAT group allows two or more companies under 51% common control to register as a single VAT entity. A representative member files one VAT return for the group. Supplies between group members are disregarded for VAT. A, C and D are incorrect descriptions.
Question 230
What is the place of supply rule for services, in the context of whether UK VAT applies?
Select an option first.
Correct answer: B — For B2B services, the place of supply is generally where the customer belongs (the customer's country); for B2C services, it is generally where the supplier belongs
Explanation: B is correct. The general place of supply rules for services: B2B (business to business) — the place of supply is where the customer belongs, so no UK VAT if the customer is outside the UK. B2C (business to consumer) — the place of supply is where the supplier belongs, so UK VAT applies for UK suppliers regardless of where the consumer is. A oversimplifies. C and D are incorrect.
Question 231
How is VAT treated on the purchase of a motor car for business use?
Select an option first.
Correct answer: B — VAT is not recoverable unless the car is used exclusively for business purposes with no private use
Explanation: B is correct. Input VAT on the purchase of a motor car (not a commercial vehicle) is blocked unless the car is used exclusively for business purposes — meaning there is genuinely zero private use. In practice this is very difficult to demonstrate so VAT on most company cars is irrecoverable. A ignores the private use block. C and D are incorrect.
Question 232
A business has output VAT of £28,000 and input VAT of £35,000 in a quarter. What is the VAT position?
Select an option first.
Correct answer: B — The business has a VAT repayment claim of £7,000 from HMRC
Explanation: B is correct. When input VAT exceeds output VAT, the business is in a net repayment position. HMRC owes the business £35,000 − £28,000 = £7,000. A has the direction of payment wrong. C ignores input VAT. D is incorrect — the difference results in a payment or repayment.
Question 233
Which of the following is a partially exempt business for VAT?
Select an option first.
Correct answer: B — A business that makes both taxable and exempt supplies, meaning only part of its input VAT can be recovered
Explanation: B is correct. A partially exempt business makes both taxable supplies (standard, reduced, or zero-rated) and exempt supplies. Input VAT directly attributable to taxable supplies is recoverable. Input VAT attributable to exempt supplies is not. Residual input VAT is apportioned using a partial exemption method. A, C and D are not the definition.
Question 234
What is the de minimis limit for partial exemption?
Select an option first.
Correct answer: A — If exempt input VAT is no more than £625 per month on average and no more than 50% of total input VAT, the business can recover all its input VAT
Explanation: A is correct. The de minimis limit for partial exemption allows a partially exempt business to recover all its input VAT (including that related to exempt supplies) if the exempt input VAT is no more than £625 per month on average AND no more than 50% of total input VAT. B, C and D are incorrect descriptions.
Question 235
What is the substantial shareholding exemption (SSE) for corporation tax?
Select an option first.
Correct answer: B — An exemption from corporation tax on gains arising on the disposal of a substantial shareholding (broadly 10%+) in a qualifying trading company held for at least 12 months
Explanation: B is correct. The SSE exempts chargeable gains (and locks in losses) on disposals of substantial shareholdings. The investing company must have held at least 10% of the ordinary shares for at least 12 months in the 6 years before disposal, and the company invested in must be a trading company. A describes the dividend exemption. C is stamp duty relief. D is incorrect — companies pay corporation tax, not CGT.
Question 236
What is patent box relief?
Select an option first.
Correct answer: B — A corporation tax regime allowing companies to elect a 10% effective tax rate on profits from qualifying patented inventions
Explanation: B is correct. The patent box allows companies to apply a 10% effective corporation tax rate to profits attributable to qualifying patents and certain other intellectual property rights. This is achieved through a formula-based deduction rather than a separate tax rate. A, C and D are incorrect.
Question 237
R&D tax relief for large companies uses what mechanism from April 2023?
Select an option first.
Correct answer: B — A Research and Development Expenditure Credit (RDEC) at a rate of 20% of qualifying R&D spend, treated as a taxable credit
Explanation: B is correct. The RDEC (now merged scheme) gives large companies a taxable credit (currently 20% from April 2023) on qualifying R&D expenditure. The credit reduces the corporation tax liability and any excess is repayable. A describes the old SME enhanced deduction. C and D are incorrect mechanisms.
Question 238
What is the corporate interest restriction (CIR)?
Select an option first.
Correct answer: B — A rule limiting the deductibility of net interest expense for UK groups, preventing excessive debt allocation to the UK
Explanation: B is correct. The CIR rules cap the deductible net interest expense for UK groups to the lower of: the fixed ratio (30% of tax-EBITDA) and the group ratio (based on the consolidated group's net interest to EBITDA). This prevents multinationals loading excessive debt into UK entities to reduce UK taxable profits. A, C and D are incorrect.
Question 239
Diverted profits tax (DPT) is aimed at which category of businesses?
Select an option first.
Correct answer: B — Large multinationals using contrived arrangements to divert profits away from the UK to avoid corporation tax
Explanation: B is correct. DPT targets large multinationals that artificially divert profits from the UK using arrangements lacking economic substance or that exploit differences between jurisdictions. The rate is 31% (from April 2023). A is too broad — most companies with overseas operations are not caught. C and D are unrelated.
Question 240
What is the tonnage tax regime for shipping companies?
Select an option first.
Correct answer: B — An alternative corporation tax basis where shipping profits are computed by reference to net tonnage rather than actual trading profits
Explanation: B is correct. Tonnage tax is an optional ring-fence corporation tax regime for qualifying shipping companies. The taxable profit is calculated by reference to the daily net tonnage of the fleet, providing certainty and potentially lower tax compared to actual profit-based taxation. A, C and D are incorrect.
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.