ACCA AS Taxation (TX-UK) 2 — Questions and Answers
Question 1: Which of the following is classified as an exempt supply for UK VAT purposes?
- Sale of new commercial property
- Insurance services (Correct answer)
- Sale of computer equipment
- Restaurant meals
Correct answer: Insurance services
Insurance is an exempt supply under UK VAT law (VAT Act 1994, Schedule 9). Exempt supplies are not subject to VAT, but the supplier cannot reclaim input VAT on costs related to making exempt supplies. Other exempt supplies include education, health services, and financial services.
Question 2: An individual makes a potentially exempt transfer (PET) of £400,000 in June 2022 and dies in March 2026. What taper relief percentage applies to reduce the IHT payable on this gift?
- 0% — full charge applies
- 20% reduction (Correct answer)
- 40% reduction
- 60% reduction
Correct answer: 20% reduction
The donor died between 3 and 4 years after making the PET. Taper relief reduces the tax payable (not the value of the gift) as follows: 0-3 years: 0%, 3-4 years: 20%, 4-5 years: 40%, 5-6 years: 60%, 6-7 years: 80%. Since the gift was made approximately 3 years and 9 months before death, the 20% taper relief applies.
Question 3: For National Insurance purposes, what is the Class 1 employee primary threshold for 2025/26?
- £6,396 per annum
- £9,100 per annum
- £12,570 per annum (Correct answer)
- £50,270 per annum
Correct answer: £12,570 per annum
The primary threshold for Class 1 employee NICs for 2025/26 is £12,570 per annum (aligned with the personal allowance). Employees pay NICs at 8% on earnings between the primary threshold (£12,570) and the upper earnings limit (£50,270), and 2% on earnings above the upper earnings limit.
Question 4: A company acquires a machine for £80,000 in its 12-month accounting period ending 31 March 2026. The machine qualifies for the annual investment allowance (AIA). What is the maximum capital allowance the company can claim?
- £18,000 (writing down allowance at 18%)
- £40,000 (50% first year allowance)
- £80,000 (full AIA) (Correct answer)
- £1,000,000 (maximum AIA regardless of cost)
Correct answer: £80,000 (full AIA)
The Annual Investment Allowance (AIA) provides a 100% deduction for qualifying plant and machinery expenditure up to £1,000,000 per year. Since the machine costs £80,000, which is within the AIA limit, the company can claim the full £80,000 as a capital allowance in the period of purchase.
Question 5: Under self-assessment, what is the deadline for filing a paper tax return for the tax year 2025/26?
- 31 October 2026 (Correct answer)
- 31 January 2027
- 5 April 2027
- 31 October 2027
Correct answer: 31 October 2026
For paper tax returns, the filing deadline is 31 October following the end of the tax year. The tax year 2025/26 ends on 5 April 2026, so the paper return must be filed by 31 October 2026. Online returns have a later deadline of 31 January 2027.
Question 6: A sole trader has been trading for several years. In 2025/26, they make a trading loss of £30,000. Which of the following is NOT an option for relieving this loss?
- Carry forward against future trading profits from the same trade
- Set against total income of 2025/26
- Set against total income of 2024/25
- Carry back against trading profits of the previous three years (Correct answer)
Correct answer: Carry back against trading profits of the previous three years
An ongoing trading loss can be: (1) carried forward against future profits of the same trade (s83 ITA 2007), (2) set against total income of the same year (s64), or (3) set against total income of the previous year (s64). The three-year carry-back is only available for terminal losses (when a trade ceases) or for early years losses (first four years of trade). A standard ongoing loss cannot be carried back three years.
ACCA AS Taxation (TX-UK) 2
Which of the following is classified as an exempt supply for UK VAT purposes?