ACCA Advanced Taxation (ATX) Exam Guide 2025 –
Set 2 | Advanced exam Questions with Answers &
Examiner Rationales
Boost your performance in the ACCA Advanced Taxation (ATX) Exam 2025 with Set of this
comprehensive exam guide. Includes new advanced-level questions, model solutions, and
examiner-style rationales aligned with current UK tax legislation. Strengthen your mastery of
corporate reorganizations, capital gains tax, VAT planning, and international tax issues with
applied case scenarios.
What is a trust (settlement)?
an arrangement under which a person (settlor) transfers property into a trust and nominates
other persons (the trustees) to hold and manage the trust assets on behalf of certain
specified persons (the beneficiaries) under the specified terms of the trust deed which sets
out and defines the power of the trustees
the six conditions for capital treatment for company purchase of own shares and do all have to
be satisfied? If they are not what treatment should we use?
The individual selling the shares back to the company must :
- have owned them for at least Five years prior (three if inherited)
- company must be an Unquoted trading company
- UK resident
- must not own more than Thirty (30%) of shares in the company after the buyback
- repurchase of shares must be for Trading purposes (i.e. buying out retiring directors or
shareholder has died and beneficiaries do not want shares)
- experience a Substantial shareholding reduction after, should hold no more than 75% of the
previous percentage shareholding.
Mnemonic - FUUTTS
ALL 6 conditions have to be satisfied for the capital treatment. If not, we should use the
dividend treatment = amount received less nominal value of the shares
Conditions to Reclaim Input VAT Pre-Registration for goods and services
Goods: Purchased within 4 years before registration
- Must still be owned by the business at the registration date (e.g., stock or equipment).
- Used for VAT-taxable business purposes
Services: Purchased within 6 months before registration
Must relate to VAT-taxable business activities.
,How to determine how much IT relief will be withdrawn for EIS and SEIS shares sold within 3
years? (arm's length vs not arm's length transaction)
Arm's length - the lower of the original amount of IT relief and 30%/50% of the proceeds of the
sale
Not arm's length - the original amount of IT relief
REMEMBER THIS
Where a loss is made on a disposal to a connected person, what is the only way that loss can
be used?
loss can only be used against future gains made on disposals to the same connected person
Terminal loss relief vs opening loss relief for individuals (what is it offset against)
terminal - trading profit only
opening - total income
T/F : There is no SBA for old buildings.
TRUE, SBA is available for new non-residential structures and buildings only.
Savings nil rate band
1000 for basic rate taxpayers
500 for higher rate taxpayers
0 for additional rate taxpayers
What does an individual claiming opening years loss relief result in?
a repayment of income tax and class 4 NICs in respect of the tax year/years in which the loss
was relieved (ofc earliest year first)
Where an individual is UK resident and deemed domiciled in the UK, is the remittance basis
available to them?
only available if unremitted overseas income and gains in a tax year is less than £2,000. In
these circumstances, the remittance basis applies automatically
T/F : For a company to be a consortium company, the entirety of its shareholding has to be
held by other companies not individuals (obv at the appropriate percentages)
TRUE, DO NOT FORGET
Summarise briefly about instalments for IHT.
An election can be made to pay IHT in ten equal annual instalments for:
- land and buildings
- unincorporated businesses
- shares or securities where the donor has a controlling interest - some unquoted shares
The first instalment is due on the normal due date: i.e. six months from the end of the month
of death for death tax
- If the asset is sold, the remaining IHT is due immediately
What are the 3 conditions for a property to be classed as FHA?
,- Property must be available for letting to the public for at least 210 days in a tax year
- Property must be actually let to the public for at least 105 days in a tax year.
- Property cannot be let to the same person(s) for more than 31 consecutive days and these
long-term lettings cannot exceed 155 days in total.
T/F : Property income is assessed for individuals on the accruals basis.
FALSE, cash basis
What is the general principle for treatment of intangibles (excluding goodwill)?
Provided the intangible is being held for the purposes of the trade:
- all debits/credits in the accounts = deducted/taxed as part of trading profits
- no adjustment to net profits required
In summary, amortisation is calculated and a tax allowable deduction
When is it useful for a company to elect to claim a 4% WDA p.a. on capitalised cost for
intangible assets? Is this election revocable?
- if the asset is not being amortised in the financial accounts, or
- is amortised at a rate of less than 4%
it is irrevocable
How are finance costs for residential properties treated for individuals?
BR tax relief - a deduction against income tax liability
T/F : The maximum consortium relief is always based on the % share of the results in the
consortium member
FALSE, based on the % share of the results in the consortium company
partially exempt trader meaning
A taxable person making both taxable and exempt supplies
What choice does a SME (company) have when the R&D relief deduction creates a loss?
- surrender the loss for an immediate 10% cash payment = good for cash flow, or
- carry the loss forward to relieve future total profits, saving corporation tax at a minimum of
19% = bigger saving but no relief until the future
SEIS reinvestment relief allows the exemption of gains on any asset. The maximum amount of
relief that can be claimed is the lowest of:
50% of the chargeable gain, or
50% of amount invested in qualifying SEIS shares
Remember that this is in addition to the income tax relief available which allows 50% of the
cost of the investment in SEIS shares to be deducted from the IT liability in the TY of
investment
T/F : For an asset that has already had relief for its fall in value through capital allowances,
which means that a capital loss is not allowable since this would give relief twice. (there will be
no capital loss)
TRUEEE, memorise this as it is a regularly tested rule
, What makes an unincorporated business meet the going concern condition for incorporation
relief?
at the time of the sale, the business is operational and has everything it needs to carry out its
business activities on a sound commercial basis
Note - a lack of business profits in the months prior to the sale does not automatically
indicate that the business is not a going concern
Annual adjustment formula for CGS (VAT)
Total original input VAT/10 (or 5) year adjustment period x (% now - % on initial recovery
What method should a company use to achieve the maximum tax saving for loss relief?
relieve losses in the companies paying corporation tax at the marginal rate.
The marginal rate is charged on taxable total profits lying between the limits.
formula to find out how much corporation tax you need to pay as a company to pay a dividend
of £7,000 (could be any amount)
dividend amount x corp tax rate/(100 - corp tax rate)
will pay corporation tax of £2,333 (£7,000 × 25/(100 – 25) to be able to pay a dividend of
£7,000
How long must a company retain its records?
records must usually be retained until six years after the end of the relevant AP
What is the only thing that affects the value of the lower and upper limits when calculating a
company's corp tax?
The number of associated companies
For CGT purposes how is the value of quoted shares calculated
the mid price
T/F : Dividends are not liable to national insurance contributions
TRUE
Can an individual form a consortium?
NOPE, never.
What does carry back for EIS & SEIS relief actually mean? (there is no carry back for VCT)
Where a disposal of either EIS or SEIS shares give rise to a capital loss, this can be used in the
normal way (i.e. against capital gains) or can be offset against total income in the tax year of
the loss and/or the previous tax year
What are the qualifying non-current assets for CGS?
- land and buildings costing ≥ £250,000
- single computer items costing ≥ £50,000
Under VAT implications for the sale or transfer of a business, the transfer will be treated as the
transfer of a going concern (TOGC) if all the following conditions are met. What are the 4
conditions?
Set 2 | Advanced exam Questions with Answers &
Examiner Rationales
Boost your performance in the ACCA Advanced Taxation (ATX) Exam 2025 with Set of this
comprehensive exam guide. Includes new advanced-level questions, model solutions, and
examiner-style rationales aligned with current UK tax legislation. Strengthen your mastery of
corporate reorganizations, capital gains tax, VAT planning, and international tax issues with
applied case scenarios.
What is a trust (settlement)?
an arrangement under which a person (settlor) transfers property into a trust and nominates
other persons (the trustees) to hold and manage the trust assets on behalf of certain
specified persons (the beneficiaries) under the specified terms of the trust deed which sets
out and defines the power of the trustees
the six conditions for capital treatment for company purchase of own shares and do all have to
be satisfied? If they are not what treatment should we use?
The individual selling the shares back to the company must :
- have owned them for at least Five years prior (three if inherited)
- company must be an Unquoted trading company
- UK resident
- must not own more than Thirty (30%) of shares in the company after the buyback
- repurchase of shares must be for Trading purposes (i.e. buying out retiring directors or
shareholder has died and beneficiaries do not want shares)
- experience a Substantial shareholding reduction after, should hold no more than 75% of the
previous percentage shareholding.
Mnemonic - FUUTTS
ALL 6 conditions have to be satisfied for the capital treatment. If not, we should use the
dividend treatment = amount received less nominal value of the shares
Conditions to Reclaim Input VAT Pre-Registration for goods and services
Goods: Purchased within 4 years before registration
- Must still be owned by the business at the registration date (e.g., stock or equipment).
- Used for VAT-taxable business purposes
Services: Purchased within 6 months before registration
Must relate to VAT-taxable business activities.
,How to determine how much IT relief will be withdrawn for EIS and SEIS shares sold within 3
years? (arm's length vs not arm's length transaction)
Arm's length - the lower of the original amount of IT relief and 30%/50% of the proceeds of the
sale
Not arm's length - the original amount of IT relief
REMEMBER THIS
Where a loss is made on a disposal to a connected person, what is the only way that loss can
be used?
loss can only be used against future gains made on disposals to the same connected person
Terminal loss relief vs opening loss relief for individuals (what is it offset against)
terminal - trading profit only
opening - total income
T/F : There is no SBA for old buildings.
TRUE, SBA is available for new non-residential structures and buildings only.
Savings nil rate band
1000 for basic rate taxpayers
500 for higher rate taxpayers
0 for additional rate taxpayers
What does an individual claiming opening years loss relief result in?
a repayment of income tax and class 4 NICs in respect of the tax year/years in which the loss
was relieved (ofc earliest year first)
Where an individual is UK resident and deemed domiciled in the UK, is the remittance basis
available to them?
only available if unremitted overseas income and gains in a tax year is less than £2,000. In
these circumstances, the remittance basis applies automatically
T/F : For a company to be a consortium company, the entirety of its shareholding has to be
held by other companies not individuals (obv at the appropriate percentages)
TRUE, DO NOT FORGET
Summarise briefly about instalments for IHT.
An election can be made to pay IHT in ten equal annual instalments for:
- land and buildings
- unincorporated businesses
- shares or securities where the donor has a controlling interest - some unquoted shares
The first instalment is due on the normal due date: i.e. six months from the end of the month
of death for death tax
- If the asset is sold, the remaining IHT is due immediately
What are the 3 conditions for a property to be classed as FHA?
,- Property must be available for letting to the public for at least 210 days in a tax year
- Property must be actually let to the public for at least 105 days in a tax year.
- Property cannot be let to the same person(s) for more than 31 consecutive days and these
long-term lettings cannot exceed 155 days in total.
T/F : Property income is assessed for individuals on the accruals basis.
FALSE, cash basis
What is the general principle for treatment of intangibles (excluding goodwill)?
Provided the intangible is being held for the purposes of the trade:
- all debits/credits in the accounts = deducted/taxed as part of trading profits
- no adjustment to net profits required
In summary, amortisation is calculated and a tax allowable deduction
When is it useful for a company to elect to claim a 4% WDA p.a. on capitalised cost for
intangible assets? Is this election revocable?
- if the asset is not being amortised in the financial accounts, or
- is amortised at a rate of less than 4%
it is irrevocable
How are finance costs for residential properties treated for individuals?
BR tax relief - a deduction against income tax liability
T/F : The maximum consortium relief is always based on the % share of the results in the
consortium member
FALSE, based on the % share of the results in the consortium company
partially exempt trader meaning
A taxable person making both taxable and exempt supplies
What choice does a SME (company) have when the R&D relief deduction creates a loss?
- surrender the loss for an immediate 10% cash payment = good for cash flow, or
- carry the loss forward to relieve future total profits, saving corporation tax at a minimum of
19% = bigger saving but no relief until the future
SEIS reinvestment relief allows the exemption of gains on any asset. The maximum amount of
relief that can be claimed is the lowest of:
50% of the chargeable gain, or
50% of amount invested in qualifying SEIS shares
Remember that this is in addition to the income tax relief available which allows 50% of the
cost of the investment in SEIS shares to be deducted from the IT liability in the TY of
investment
T/F : For an asset that has already had relief for its fall in value through capital allowances,
which means that a capital loss is not allowable since this would give relief twice. (there will be
no capital loss)
TRUEEE, memorise this as it is a regularly tested rule
, What makes an unincorporated business meet the going concern condition for incorporation
relief?
at the time of the sale, the business is operational and has everything it needs to carry out its
business activities on a sound commercial basis
Note - a lack of business profits in the months prior to the sale does not automatically
indicate that the business is not a going concern
Annual adjustment formula for CGS (VAT)
Total original input VAT/10 (or 5) year adjustment period x (% now - % on initial recovery
What method should a company use to achieve the maximum tax saving for loss relief?
relieve losses in the companies paying corporation tax at the marginal rate.
The marginal rate is charged on taxable total profits lying between the limits.
formula to find out how much corporation tax you need to pay as a company to pay a dividend
of £7,000 (could be any amount)
dividend amount x corp tax rate/(100 - corp tax rate)
will pay corporation tax of £2,333 (£7,000 × 25/(100 – 25) to be able to pay a dividend of
£7,000
How long must a company retain its records?
records must usually be retained until six years after the end of the relevant AP
What is the only thing that affects the value of the lower and upper limits when calculating a
company's corp tax?
The number of associated companies
For CGT purposes how is the value of quoted shares calculated
the mid price
T/F : Dividends are not liable to national insurance contributions
TRUE
Can an individual form a consortium?
NOPE, never.
What does carry back for EIS & SEIS relief actually mean? (there is no carry back for VCT)
Where a disposal of either EIS or SEIS shares give rise to a capital loss, this can be used in the
normal way (i.e. against capital gains) or can be offset against total income in the tax year of
the loss and/or the previous tax year
What are the qualifying non-current assets for CGS?
- land and buildings costing ≥ £250,000
- single computer items costing ≥ £50,000
Under VAT implications for the sale or transfer of a business, the transfer will be treated as the
transfer of a going concern (TOGC) if all the following conditions are met. What are the 4
conditions?
