ACCA Advanced Taxation

Question 1

What is the key difference between tax avoidance and tax evasion?

Accepted Answer

Avoidance uses legal means to reduce tax, while evasion is illegal and involves concealing or misrepresenting information

Answer

Tax avoidance arranges affairs legally to minimise tax, although it may be challenged under anti-avoidance rules. Tax evasion is a criminal offence involving deliberate concealment or misrepresentation to HMRC.

Question 2

Under the UK statutory residence test, an individual who spends 183 days or more in the UK in a tax year is:

Accepted Answer

Automatically UK resident

Answer

Spending 183 days or more in the UK in a tax year satisfies the automatic UK residence test. No other ties or tests need to be considered.

Question 3

What group relationship is required between companies to claim group relief for trading losses in the UK?

Accepted Answer

A 75% subsidiary relationship

Answer

Group relief is available between a parent and its 75% subsidiaries, and between 75% subsidiaries of a common parent. The relationship is tested on ordinary share capital, profits available for distribution and assets on winding up.

Question 4

A potentially exempt transfer (PET) is made by an individual who then dies within seven years of making the gift. What is the effect?

Accepted Answer

The PET becomes chargeable to inheritance tax, using the nil rate band first

Answer

A PET is exempt if the donor survives seven years. If the donor dies within seven years, the PET becomes chargeable and uses the nil rate band available at the date of the gift. Any excess is taxed at the death rate, subject to taper relief if the death falls between three and seven years after the gift.

Question 5

What is the main advantage of companies registering as a VAT group in the UK?

Accepted Answer

Supplies between group members are disregarded for VAT, and the group makes a single VAT return

Answer

Companies under common control can register as a single taxable person. Supplies between members are ignored for VAT and one return is filed, which reduces administration.

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA Advanced Taxation