ACCA SP Advanced Taxation (ATX-UK)

Question 1

A UK sole trader has been trading for several years and is considering incorporating the business. Which of the following Capital Gains Tax (CGT) reliefs is specifically designed to defer gains arising on the transfer of a business to a company?

Accepted Answer

Incorporation relief under s.162 TCGA 1992

Answer

Section 162 TCGA 1992 provides incorporation relief, which automatically applies when a business (not just individual assets) is transferred to a company as a going concern in exchange wholly or partly for shares. The gains on the chargeable assets transferred are deferred by reducing the base cost of the shares received. This is distinct from BADR (which provides a lower rate but doesn't defer) and rollover relief (which relates to replacement of assets).

Question 2

For the 2025/26 tax year, an individual makes a chargeable gain of £40,000 on the disposal of a residential property that has never been their main residence. After deducting the annual exempt amount of £3,000, what rate(s) of CGT apply if they are a higher rate taxpayer?

Accepted Answer

24% on the entire net gain

Answer

For the 2025/26 tax year, residential property gains (on properties that are not the individual's main residence) are taxed at 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers. Since this individual is already a higher rate taxpayer, the entire net gain of £37,000 (£40,000 - £3,000 AEA) is taxed at 24%. The rates for residential property are higher than the standard CGT rates of 10%/20%.

Question 3

A UK company has a 31 March year end and makes a trading loss of £500,000 in the year ended 31 March 2026. Which of the following loss relief claims can the company make under Corporation Tax rules?

Accepted Answer

Offset against total profits of the current period and/or carry back 1 year against total profits, then carry forward against future total profits

Answer

Under s.37 CTA 2010, a company can offset a trading loss against total profits (including investment income and chargeable gains) of the current accounting period. Any remaining loss can be carried back 12 months against total profits. Under s.45A/45B CTA 2010, losses can also be carried forward against future total profits (not just trading profits), subject to the £5 million deductions allowance and 50% restriction for amounts above this threshold.

Question 4

An individual dies on 15 January 2026 with an estate valued at £625,000. They had made no lifetime transfers. The estate includes a family home worth £350,000 left to their child. What is the Inheritance Tax (IHT) liability on the estate?

Accepted Answer

£50,000

Answer

The nil rate band (NRB) is £325,000. The residence nil rate band (RNRB) of £175,000 applies because the home is passed to a direct descendant (child). Total available bands = £325,000 + £175,000 = £500,000. Taxable estate = £625,000 - £500,000 = £125,000. IHT at 40% = £125,000 × 40% = £50,000. The RNRB is a valuable additional relief but only applies when a qualifying residential property is left to direct descendants (children, grandchildren).

Question 5

A UK VAT-registered trader supplies both standard-rated and exempt supplies. In a VAT quarter, the trader incurs £30,000 of input VAT, of which £10,000 relates to taxable supplies, £12,000 relates to exempt supplies, and £8,000 is unattributed. Using the partial exemption standard method, how much input VAT can the trader recover?

Accepted Answer

£15,200

Answer

Under the partial exemption standard method: (1) Directly attributable to taxable supplies: £10,000 (fully recoverable). (2) Directly attributable to exempt supplies: £12,000 (not recoverable). (3) Unattributed (residual): £8,000 must be apportioned using the standard method ratio = taxable supplies / total supplies. Assuming the ratio based on values gives approximately 65% recoverable: £8,000 × 65% = £5,200. Total recoverable = £10,000 + £5,200 = £15,200. The de minimis test may also apply if exempt input tax is below £625 per month on average.

ACCA Strategic Professional Practice Test

ACCA Strategic Professional Practice Test

ACCA SP Advanced Taxation (ATX-UK)