ATT Paper 1 Personal Tax Final Certification
Exam Test Bank 2026/2027 – Complete
Practice Questions & Revised Answers –
Personal Taxation Study Guide
SECTION 1: QUESTIONS 1–50
Question 1
An employee is reimbursed by their employer for the cost of a private holiday. The
reimbursement is most likely:
A. A deductible employment expense
B. A tax-free business expense
C. A taxable employment benefit
D. A capital loss
Answer: C
Rationale: A private holiday provides a personal benefit and is generally taxable unless a
specific exemption applies.
Question 2
An employee pays £600 for a professional subscription that is necessary for their employment
and belongs to an approved professional body. Subject to the relevant conditions, the payment
may:
A. Always be treated as a capital loss
B. Qualify for tax relief as an employment expense
C. Be treated as dividend income
D. Be subject to CGT
Answer: B
,Rationale: Certain professional subscriptions required for employment can qualify for
employment-related tax relief.
Question 3
Which test is particularly important when deciding whether an expense incurred by an employee
is deductible?
A. Whether the employee personally prefers the expense
B. Whether the expense was paid in cash
C. Whether the expense satisfies the statutory employment-expense requirements
D. Whether the employer made a profit
Answer: C
Rationale: Employment-expense deductions are governed by specific statutory conditions and
cannot be claimed merely because an employee considers an expense useful.
Question 4
Which statement best describes the principal objective of ATT Paper 1 Personal Taxation?
A. To calculate corporation tax liabilities for companies
B. To calculate VAT liabilities for businesses
C. To identify, explain and calculate tax consequences arising for individuals
D. To administer customs duties on imported goods
Answer: C
Rationale: Paper 1 focuses on individual taxation, including identifying tax issues, calculating
liabilities and explaining the consequences of different transactions.
Question 5
An employee receives a monthly salary of £4,000 before deductions. For Income Tax purposes,
the salary is generally:
A. Exempt because it is employment income
B. A capital receipt
,C. Taxable employment income
D. Taxable only when withdrawn from a bank account
Answer: C
Rationale: Salary from employment is taxable employment income unless a specific exemption or
relief applies.
Question 6
An employee receives a cash bonus from their employer for achieving performance targets. The
bonus is generally:
A. A tax-free capital receipt
B. Taxable employment income
C. Exempt if paid annually
D. Taxable only under Capital Gains Tax
Answer: B
Rationale: Cash bonuses arising from employment are normally taxable as employment income.
Question 7
An employer provides an employee with a company car available for private use. The employee
may have a taxable benefit because:
A. All company cars are exempt
B. Private availability of the vehicle can give rise to a taxable benefit
C. Only cars purchased personally are taxable
D. Cars are always treated as dividends
Answer: B
Rationale: A company car available for private use can create a taxable benefit calculated under
the relevant benefit-in-kind rules.
Question 8
Which factor can affect the taxable benefit arising from a company car?
, A. The employee's favourite colour
B. The vehicle's relevant characteristics and its availability for private use
C. The employee's mortgage balance
D. The employee's savings account balance
Answer: B
Rationale: Company-car benefit calculations depend on statutory factors relating to the vehicle
and its private availability.
Question 9
An employer provides an employee with a loan at a preferential interest rate. Depending on the
amount and conditions, this may create:
A. A CGT exemption
B. A taxable employment benefit
C. A trading loss
D. Dividend income automatically
Answer: B
Rationale: Certain employer-provided beneficial loans are taxable benefits subject to statutory
rules and exemptions.
Question 10
An employer pays an employee's private income tax liability. The payment is generally:
A. Ignored for tax purposes
B. A taxable employment-related benefit
C. A capital contribution
D. A tax-free reimbursement
Answer: B
Rationale: Payment of an employee's personal tax liability by an employer generally constitutes
a taxable benefit.
Question 11
Exam Test Bank 2026/2027 – Complete
Practice Questions & Revised Answers –
Personal Taxation Study Guide
SECTION 1: QUESTIONS 1–50
Question 1
An employee is reimbursed by their employer for the cost of a private holiday. The
reimbursement is most likely:
A. A deductible employment expense
B. A tax-free business expense
C. A taxable employment benefit
D. A capital loss
Answer: C
Rationale: A private holiday provides a personal benefit and is generally taxable unless a
specific exemption applies.
Question 2
An employee pays £600 for a professional subscription that is necessary for their employment
and belongs to an approved professional body. Subject to the relevant conditions, the payment
may:
A. Always be treated as a capital loss
B. Qualify for tax relief as an employment expense
C. Be treated as dividend income
D. Be subject to CGT
Answer: B
,Rationale: Certain professional subscriptions required for employment can qualify for
employment-related tax relief.
Question 3
Which test is particularly important when deciding whether an expense incurred by an employee
is deductible?
A. Whether the employee personally prefers the expense
B. Whether the expense was paid in cash
C. Whether the expense satisfies the statutory employment-expense requirements
D. Whether the employer made a profit
Answer: C
Rationale: Employment-expense deductions are governed by specific statutory conditions and
cannot be claimed merely because an employee considers an expense useful.
Question 4
Which statement best describes the principal objective of ATT Paper 1 Personal Taxation?
A. To calculate corporation tax liabilities for companies
B. To calculate VAT liabilities for businesses
C. To identify, explain and calculate tax consequences arising for individuals
D. To administer customs duties on imported goods
Answer: C
Rationale: Paper 1 focuses on individual taxation, including identifying tax issues, calculating
liabilities and explaining the consequences of different transactions.
Question 5
An employee receives a monthly salary of £4,000 before deductions. For Income Tax purposes,
the salary is generally:
A. Exempt because it is employment income
B. A capital receipt
,C. Taxable employment income
D. Taxable only when withdrawn from a bank account
Answer: C
Rationale: Salary from employment is taxable employment income unless a specific exemption or
relief applies.
Question 6
An employee receives a cash bonus from their employer for achieving performance targets. The
bonus is generally:
A. A tax-free capital receipt
B. Taxable employment income
C. Exempt if paid annually
D. Taxable only under Capital Gains Tax
Answer: B
Rationale: Cash bonuses arising from employment are normally taxable as employment income.
Question 7
An employer provides an employee with a company car available for private use. The employee
may have a taxable benefit because:
A. All company cars are exempt
B. Private availability of the vehicle can give rise to a taxable benefit
C. Only cars purchased personally are taxable
D. Cars are always treated as dividends
Answer: B
Rationale: A company car available for private use can create a taxable benefit calculated under
the relevant benefit-in-kind rules.
Question 8
Which factor can affect the taxable benefit arising from a company car?
, A. The employee's favourite colour
B. The vehicle's relevant characteristics and its availability for private use
C. The employee's mortgage balance
D. The employee's savings account balance
Answer: B
Rationale: Company-car benefit calculations depend on statutory factors relating to the vehicle
and its private availability.
Question 9
An employer provides an employee with a loan at a preferential interest rate. Depending on the
amount and conditions, this may create:
A. A CGT exemption
B. A taxable employment benefit
C. A trading loss
D. Dividend income automatically
Answer: B
Rationale: Certain employer-provided beneficial loans are taxable benefits subject to statutory
rules and exemptions.
Question 10
An employer pays an employee's private income tax liability. The payment is generally:
A. Ignored for tax purposes
B. A taxable employment-related benefit
C. A capital contribution
D. A tax-free reimbursement
Answer: B
Rationale: Payment of an employee's personal tax liability by an employer generally constitutes
a taxable benefit.
Question 11
