ACCA Advanced Taxation (ATX) Exam Guide 2025 –
Scenario-Based Questions with Answers &
Detailed Rationales
Prepare for the ACCA Advanced Taxation (ATX) Exam 2025 with this expertly crafted Set guide
featuring exam-style questions, model answers, and in-depth rationales based on the latest
tax legislation. Master complex topics such as corporation tax, personal tax, inheritance tax,
and international taxation with clear examiner-focused guidance.
Accounting Period
For taxation purposes, this is usually the company's period of account but cannot exceed 12
months
AP Starts
The accounting period starts when:
- A company starts to trade
- A company acquires a source of income chargeable to corporation tax
- Immediately after the end of the previous AP
AP Ends
The accounting period ends on the earliest of:
- 12 months after the beginning of the AP
- The end of the company's period of account
- When the company begins or ceases to trade
Long periods of account
If a company's period of account is longer than 12 months, then it needs to be split into two
APs for tax purposes
- First: 12 months
- Second: Remainder
Note:
- There will be 2 payment due dates (9 mths 1 day after end of each AP, if not large)
- Only one file date for the returns (12 mths after end of the long period of account)
,Differences for Tax Adjusted Trading Profits (For companies and unincorporated traders)
The main differences between the adjustments made for a company and those for an
unincorporated trader:
Private Use Adjustments:
- None for a company, adjusted through benefits
Capital Allowances:
- Full capital allowances, even with private use
- Calculated for companies for each AP rather than period of account
Dividends:
- Not allowable deductions
Interest Payable:
- NTLR rules
Disposal of Super Deduction Assets
When assets in the main rate pool that had this type of ECA claimed (130%) on it are disposed:
- Capital Allowance Balancing Charge = proceeds
- The proceeds do not get deducted from the main pool
Disposal of FYA Assets
When assets in the special rate pool that had this type of ECA (50%) claimed on it are disposed:
- Capital Allowance Balancing Charge =
Proceeds x proportion of expenditure on which claimed x 50%
- Remaining proceeds are deducted from special rate pool
Enhanced Capital Allowances
Companies purchasing new qualifying plant and machinery between 1 April 21 and 31 March
23 were able to claim:
- 130% super deduction for main pool assets
- 50% first year allowance (FYA) for special rate pool assets
Also known as ECA's
Loan Relationship Rules
Rules that determine the corporation tax treatment of interest receivable, interest payable,
and other costs relating to borrowing money
All interest is taxed on the accruals basis
Must determine whether the interest payable/receivable is trading or Non-trading
Further Points:
- Interest is normally received and paid gross
,- Exception: If interest paid to an individual on unquoted loan notes, a company has to
deduct 20% tax and pay that directly to HMRC (overall payment is same, just who it goes to)
- ALWAYS deducted gross amount of interest from taxable profits
- If non-trade expenses > non-trade income: excess non-trade deficit is eligible for relief
Trading Income Loan Relationship Rules
When the interest receivable is due to the company's trade
e.g. for banks
Non-Trading Income Loan Relationship Rules
When the interest receivable is due to anything other than the company's trade
e.g. from investments, interest on repayments of corporation tax, profit on disposal of
corporate loan notes
Trading Expenses Loan Relationship Rules
When the interest payable/expenses are due to :
- Loans to purchase plant and machinery
- Loans to purchase property for trading
- Loans/overdraft to fund daily operations
- Write off of trade receivables
Non-Trading Expenses Loan Relationship Rules
When the interest payables/expenses are due to:
- Loans to buy a let property (i.e. not used in trade)
- Loans to buy shares of another company/investment
- Interest paid on overdue corporation tax
- Write-off of a non-trade loan
- Loss on disposal of corporate loan notes
Trading Loan Relationship Rules Treatment
Trading loan relationships amounts are included as part of trading profits
If the amounts are already included in the accounts, then there is no adjustment to trading
profits
Non-Trading Loan Relationship Rules Treatment (NTLRs)
Non-trading loan relationships are treated as:
- Interest income: deducted from profits
- Interest payable: added back to profits
Amounts are included as part of 'interest income' or NTLR instead
Further points on Loan Relationship Rules
Further points:
, - Incidental costs of loan finance follow the treatment of the loan itself (i.e. expenses in relation
to raising loan finance)
- Write-off of an impaired debt that arises from lending money is also dealt under loan
relationship rules
Small Local Donations
Donations that are made to small local organisations, such as local charities, schools, hospitals,
etc.
These are deducted as a trading expense
Qualifying Charitable Donation (QCD)
Donations that are not made to small local organisations, such as a national charity
These are deducted from TTP
If these exceed total profits, then no relief for the excess is given (subject to group relief)
All amounts are paid gross (unlike gift aid for individuals)
If > total profits:
- No relief given for the excess unless part of a 75% group and subject to group relief claim
Corporation Tax Upper Limit
When augmented profits > £250,000, a company's TTP is taxed at 25% (the main rate)
Must be time apportioned for short APs and divided by the total number of associated
companies
Corporation Tax Lower Limit
When augmented profits <= £50,000, a company's TTP is taxed at 19% (the small profits rate)
Must be time apportioned for short APs and divided by the total number of associated
companies
Augmented Profits
These profits are calculated by adding dividends received from non-associated companies to a
company's TTP
These are compared against the Upper & Lower limits to determine a company's tax rate
payable
Associated Companies
For tax purposes, companies are classified as this if:
- One of the companies controls > 50% of the other(s)
- They are both controlled by the same 'person' (company or individual)
Includes:
- Overseas companies
- Joiners or leavers
Excludes:
Scenario-Based Questions with Answers &
Detailed Rationales
Prepare for the ACCA Advanced Taxation (ATX) Exam 2025 with this expertly crafted Set guide
featuring exam-style questions, model answers, and in-depth rationales based on the latest
tax legislation. Master complex topics such as corporation tax, personal tax, inheritance tax,
and international taxation with clear examiner-focused guidance.
Accounting Period
For taxation purposes, this is usually the company's period of account but cannot exceed 12
months
AP Starts
The accounting period starts when:
- A company starts to trade
- A company acquires a source of income chargeable to corporation tax
- Immediately after the end of the previous AP
AP Ends
The accounting period ends on the earliest of:
- 12 months after the beginning of the AP
- The end of the company's period of account
- When the company begins or ceases to trade
Long periods of account
If a company's period of account is longer than 12 months, then it needs to be split into two
APs for tax purposes
- First: 12 months
- Second: Remainder
Note:
- There will be 2 payment due dates (9 mths 1 day after end of each AP, if not large)
- Only one file date for the returns (12 mths after end of the long period of account)
,Differences for Tax Adjusted Trading Profits (For companies and unincorporated traders)
The main differences between the adjustments made for a company and those for an
unincorporated trader:
Private Use Adjustments:
- None for a company, adjusted through benefits
Capital Allowances:
- Full capital allowances, even with private use
- Calculated for companies for each AP rather than period of account
Dividends:
- Not allowable deductions
Interest Payable:
- NTLR rules
Disposal of Super Deduction Assets
When assets in the main rate pool that had this type of ECA claimed (130%) on it are disposed:
- Capital Allowance Balancing Charge = proceeds
- The proceeds do not get deducted from the main pool
Disposal of FYA Assets
When assets in the special rate pool that had this type of ECA (50%) claimed on it are disposed:
- Capital Allowance Balancing Charge =
Proceeds x proportion of expenditure on which claimed x 50%
- Remaining proceeds are deducted from special rate pool
Enhanced Capital Allowances
Companies purchasing new qualifying plant and machinery between 1 April 21 and 31 March
23 were able to claim:
- 130% super deduction for main pool assets
- 50% first year allowance (FYA) for special rate pool assets
Also known as ECA's
Loan Relationship Rules
Rules that determine the corporation tax treatment of interest receivable, interest payable,
and other costs relating to borrowing money
All interest is taxed on the accruals basis
Must determine whether the interest payable/receivable is trading or Non-trading
Further Points:
- Interest is normally received and paid gross
,- Exception: If interest paid to an individual on unquoted loan notes, a company has to
deduct 20% tax and pay that directly to HMRC (overall payment is same, just who it goes to)
- ALWAYS deducted gross amount of interest from taxable profits
- If non-trade expenses > non-trade income: excess non-trade deficit is eligible for relief
Trading Income Loan Relationship Rules
When the interest receivable is due to the company's trade
e.g. for banks
Non-Trading Income Loan Relationship Rules
When the interest receivable is due to anything other than the company's trade
e.g. from investments, interest on repayments of corporation tax, profit on disposal of
corporate loan notes
Trading Expenses Loan Relationship Rules
When the interest payable/expenses are due to :
- Loans to purchase plant and machinery
- Loans to purchase property for trading
- Loans/overdraft to fund daily operations
- Write off of trade receivables
Non-Trading Expenses Loan Relationship Rules
When the interest payables/expenses are due to:
- Loans to buy a let property (i.e. not used in trade)
- Loans to buy shares of another company/investment
- Interest paid on overdue corporation tax
- Write-off of a non-trade loan
- Loss on disposal of corporate loan notes
Trading Loan Relationship Rules Treatment
Trading loan relationships amounts are included as part of trading profits
If the amounts are already included in the accounts, then there is no adjustment to trading
profits
Non-Trading Loan Relationship Rules Treatment (NTLRs)
Non-trading loan relationships are treated as:
- Interest income: deducted from profits
- Interest payable: added back to profits
Amounts are included as part of 'interest income' or NTLR instead
Further points on Loan Relationship Rules
Further points:
, - Incidental costs of loan finance follow the treatment of the loan itself (i.e. expenses in relation
to raising loan finance)
- Write-off of an impaired debt that arises from lending money is also dealt under loan
relationship rules
Small Local Donations
Donations that are made to small local organisations, such as local charities, schools, hospitals,
etc.
These are deducted as a trading expense
Qualifying Charitable Donation (QCD)
Donations that are not made to small local organisations, such as a national charity
These are deducted from TTP
If these exceed total profits, then no relief for the excess is given (subject to group relief)
All amounts are paid gross (unlike gift aid for individuals)
If > total profits:
- No relief given for the excess unless part of a 75% group and subject to group relief claim
Corporation Tax Upper Limit
When augmented profits > £250,000, a company's TTP is taxed at 25% (the main rate)
Must be time apportioned for short APs and divided by the total number of associated
companies
Corporation Tax Lower Limit
When augmented profits <= £50,000, a company's TTP is taxed at 19% (the small profits rate)
Must be time apportioned for short APs and divided by the total number of associated
companies
Augmented Profits
These profits are calculated by adding dividends received from non-associated companies to a
company's TTP
These are compared against the Upper & Lower limits to determine a company's tax rate
payable
Associated Companies
For tax purposes, companies are classified as this if:
- One of the companies controls > 50% of the other(s)
- They are both controlled by the same 'person' (company or individual)
Includes:
- Overseas companies
- Joiners or leavers
Excludes:
