ACCA Taxation (TX) Exam 2025 Complete Study
Guide with Questions, Answers & Explanations
Prepare for the ACCA Taxation (TX) Exam 2025 with updated practice questions, worked
examples, and explanations based on the latest tax laws and ACCA syllabus.
The Tax Regime
The overall functions and purposes of taxation in a modern economy are: to raise finance,
regulate demand and guide behaviour.
Types of tax - Income Tax
Suffered by:
Individuals - e.g.
Employees
Sole traders
Partners in a partnership
Unemployed
Retired
Types of tax - National Insurance
Suffered by:
Employees
Self-employed
Employers
,Types of tax - Capital Gains Tax
Individuals (companies pay corporation tax on capital gains)
Types of tax - Inheritance Tax
Individuals
Types of tax - Corporation Tax
Companies
Types of tax - Value Added Tax
The consumer. Collected by businesses, both unincorporated and companies.
The difference between direct and indirect taxation
> Indirect tax.
An indirect tax, e.g. VAT, is a tax collected by an intermediary (such as a retailer) from the
person who bears the ultimate cost of the tax (the customer). The intermediary later files a tax
return and forwards the tax collected to the HMRC.
>Direct tax.
A direct tax is a tax collected by HMRC directly from the taxpayer, e.g. income tax, corporation
tax, capital gains tax.
Tax evasion and tax avoidance
>Evasion.
Evasion is ILLEGAL. It involves deliberate concealment of the true state of a taxpayer's affairs.
Evasion is a crime that renders the guilty party liable to fines or imprisonment.
>Avoidance. Avoidance is the LEGAL utilisation of the tax regime to one's advantage, e.g. using
tax reliefs, changing status through incorporation, living in a low tax country.
,Schemes
HMRC has targeted many specific tax avoidance schemes with anti-avoidance legislation to
counter the tax advantages gained by the taxpayer.
HMRC has also introduced:
-Disclosure obligations regarding anti-avoidance tax schemes requiring the declaration of
details of the scheme to HMRC.
-A general anti abuse rule (GAAR) which stops tax advantages (e.g. increased deduction/
decreased income) arising from abusive tax arrangements. Abusive arrangements are those
which cannot be regarded as a reasonable course of action and are deliberately put in place to
avoid tax.
As an accountant, you are a taxpayer's agent.
>A taxpayer may appoint an accountant to prepare and submit a tax return, but it is the
taxpayer, not the accountant, who is responsible for the return and paying tax.
In dealing with clients, the ACCA requires a member to uphold its standards. The ACCA's code
of ethics and conduct sets out five fundamental principles that members should abide by.
These are:
(i) Objectivity
(ii) Professional behaviour
(iii) Professional competence and due care
(iv) Integrity
(v) Confidentiality
Accountant responsibility
It is the responsibility of an accountant who learns of a material error or omission in a client's
tax return or of a failure to file a return, to advise the client of the situation and to recommend
disclosure to HMRC.
, If a client fails to correct a material error/omission or failure, the accountant must:
(1) Cease to act for the client.
An accountant should not provide details to HMRC of why they are ceasing to act.
(2) Inform HMRC that he is no longer acting for the client.
(3) Make a money laundering report.
The money laundering report which sets out the situation is made to the Money Laundering
Reporting Officer (MLRO) within the accountancy firm.
The MLRO must decide whether to make a report to the National Crime agency (NCA).
Where a report is made the client should not be informed as this may amount to tipping off,
which is an offence.
A report to the NCA does not remove the requirement to disclose the information to HMRC.
Dishonest conduct of tax agents
-There is a civil penalty of up to £50,000 for the dishonest conduct of tax agents
-In cases where the penalty exceeds £5,000, HMRC may publish details of the penalised agent.
-With agreement of the Tax Tribunal, HMRC can access the working papers of a dishonest
agent.
The scope of income tax -
Individuals are liable to income tax for a tax year.
The tax year runs from 6 April to 5 April.
-Individuals who are resident in the UK for a tax year are liable to UK tax on their worldwide
income.
-Non-UK resident individuals are only liable to UK tax on income arising in the UK.
Guide with Questions, Answers & Explanations
Prepare for the ACCA Taxation (TX) Exam 2025 with updated practice questions, worked
examples, and explanations based on the latest tax laws and ACCA syllabus.
The Tax Regime
The overall functions and purposes of taxation in a modern economy are: to raise finance,
regulate demand and guide behaviour.
Types of tax - Income Tax
Suffered by:
Individuals - e.g.
Employees
Sole traders
Partners in a partnership
Unemployed
Retired
Types of tax - National Insurance
Suffered by:
Employees
Self-employed
Employers
,Types of tax - Capital Gains Tax
Individuals (companies pay corporation tax on capital gains)
Types of tax - Inheritance Tax
Individuals
Types of tax - Corporation Tax
Companies
Types of tax - Value Added Tax
The consumer. Collected by businesses, both unincorporated and companies.
The difference between direct and indirect taxation
> Indirect tax.
An indirect tax, e.g. VAT, is a tax collected by an intermediary (such as a retailer) from the
person who bears the ultimate cost of the tax (the customer). The intermediary later files a tax
return and forwards the tax collected to the HMRC.
>Direct tax.
A direct tax is a tax collected by HMRC directly from the taxpayer, e.g. income tax, corporation
tax, capital gains tax.
Tax evasion and tax avoidance
>Evasion.
Evasion is ILLEGAL. It involves deliberate concealment of the true state of a taxpayer's affairs.
Evasion is a crime that renders the guilty party liable to fines or imprisonment.
>Avoidance. Avoidance is the LEGAL utilisation of the tax regime to one's advantage, e.g. using
tax reliefs, changing status through incorporation, living in a low tax country.
,Schemes
HMRC has targeted many specific tax avoidance schemes with anti-avoidance legislation to
counter the tax advantages gained by the taxpayer.
HMRC has also introduced:
-Disclosure obligations regarding anti-avoidance tax schemes requiring the declaration of
details of the scheme to HMRC.
-A general anti abuse rule (GAAR) which stops tax advantages (e.g. increased deduction/
decreased income) arising from abusive tax arrangements. Abusive arrangements are those
which cannot be regarded as a reasonable course of action and are deliberately put in place to
avoid tax.
As an accountant, you are a taxpayer's agent.
>A taxpayer may appoint an accountant to prepare and submit a tax return, but it is the
taxpayer, not the accountant, who is responsible for the return and paying tax.
In dealing with clients, the ACCA requires a member to uphold its standards. The ACCA's code
of ethics and conduct sets out five fundamental principles that members should abide by.
These are:
(i) Objectivity
(ii) Professional behaviour
(iii) Professional competence and due care
(iv) Integrity
(v) Confidentiality
Accountant responsibility
It is the responsibility of an accountant who learns of a material error or omission in a client's
tax return or of a failure to file a return, to advise the client of the situation and to recommend
disclosure to HMRC.
, If a client fails to correct a material error/omission or failure, the accountant must:
(1) Cease to act for the client.
An accountant should not provide details to HMRC of why they are ceasing to act.
(2) Inform HMRC that he is no longer acting for the client.
(3) Make a money laundering report.
The money laundering report which sets out the situation is made to the Money Laundering
Reporting Officer (MLRO) within the accountancy firm.
The MLRO must decide whether to make a report to the National Crime agency (NCA).
Where a report is made the client should not be informed as this may amount to tipping off,
which is an offence.
A report to the NCA does not remove the requirement to disclose the information to HMRC.
Dishonest conduct of tax agents
-There is a civil penalty of up to £50,000 for the dishonest conduct of tax agents
-In cases where the penalty exceeds £5,000, HMRC may publish details of the penalised agent.
-With agreement of the Tax Tribunal, HMRC can access the working papers of a dishonest
agent.
The scope of income tax -
Individuals are liable to income tax for a tax year.
The tax year runs from 6 April to 5 April.
-Individuals who are resident in the UK for a tax year are liable to UK tax on their worldwide
income.
-Non-UK resident individuals are only liable to UK tax on income arising in the UK.
