ACCA - Association of Chartered Certified Accountants Taxation Principles and Regulations Questions and Answers

Question 1

A UK-based retail company's sales for the quarter consist of £100,000 from children's clothing, £50,000 from books, and £20,000 from facilitating lottery ticket sales.
How should the company account for VAT on these supplies?

Accepted Answer

Children's clothing and books are zero-rated; lottery ticket sales are exempt.

Answer

Children's clothing is standard-rated; books are zero-rated; lottery sales are exempt.

Answer

All supplies are standard-rated as the business is profit-making.

Answer

Children's clothing is zero-rated; books and lottery sales are standard-rated.

Question 2

An individual is employed with an annual salary of £60,000. Her employer provides her with a company car for both business and private use. The car has a list price of £30,000 and CO2 emissions of 120g/km. Using the appropriate percentage of 29% for this emissions level, what is the taxable benefit in kind for the company car that must be added to her employment income?

Accepted Answer

£8,700

Answer

£6,000

Answer

£30,000

Answer

£5,800

Question 3

A UK limited company, which is not part of a group, incurs £1,350,000 of expenditure on new qualifying plant and machinery in its 12-month accounting period. The Annual Investment Allowance (AIA) limit for the period is £1,000,000. What is the maximum amount of capital allowances the company can claim for this expenditure in the current period, assuming it wants to maximize the claim?

Accepted Answer

£1,000,000 under the AIA plus a Writing Down Allowance on the remaining £350,000.

Answer

£1,350,000 under the AIA as it is all new machinery.

Answer

£1,000,000 under the AIA only.

Answer

Only a Writing Down Allowance (WDA) on the full £1,350,000.

Question 4

When calculating a chargeable gain for Capital Gains Tax (CGT) purposes on the disposal of an asset, which of the following is NOT an allowable cost?

Accepted Answer

The cost of repairing a leaking roof on a property to maintain its original state.

Answer

Stamp Duty Land Tax (SDLT) paid on the initial purchase of a property.

Answer

Legal fees incurred for the sale of the asset.

Answer

The cost of building an extension that enhances the value of a property.

Question 5

A chartered certified accountant, acting as a tax agent, discovers a material error in a client's tax return from a previous year which has already been submitted. The error resulted in a significant understatement of tax. According to professional and ethical guidelines, what is the accountant's immediate primary responsibility?

Accepted Answer

Advise the client of the error, explain the need for disclosure to the tax authorities, and seek the client's consent to correct it.

Answer

Immediately inform the tax authorities of the error to protect their own professional standing.

Answer

Correct the error in the current year's tax return without mentioning the prior year.

Answer

Terminate the engagement with the client immediately to avoid any association with non-compliance.

Question 6

Which of the following statements best describes a Potentially Exempt Transfer (PET) for UK Inheritance Tax (IHT) purposes?

Accepted Answer

A lifetime gift from one individual to another that becomes fully exempt from IHT if the donor survives for seven years after making the gift.

Answer

A gift into a discretionary trust, which is subject to an immediate lifetime IHT charge.

Answer

A transfer that is immediately chargeable to IHT at a lifetime rate of 20% when it is made.

Answer

A gift made to a spouse or civil partner, which is always fully exempt from IHT.

A UK-based retail company's sales for the quarter consist of £100,000 from children's clothing, £50,000 from books, and £20,000 from facilitating lottery ticket sales.How should the company account for VAT on these supplies?

A UK-based retail company's sales for the quarter consist of £100,000 from children's clothing, £50,000 from books, and £20,000 from facilitating lottery ticket sales.
How should the company account for VAT on these supplies?