ATT ADVANCED TAX PROFESSIONAL
TEST 3 QUESTIONS AND ANSWERS
1. Which of the following conditions must be met for a company to be considered a ‘75%
subsidiary’ for group relief purposes?
A. The parent must own at least 75% of the ordinary share capital only.
B. The parent must own at least 75% of the ordinary share capital and be entitled to 75%
of profits and assets on winding up.
C. The parent must own 51% of the ordinary share capital and 75% of the voting rights.
D. The parent must own 100% of the ordinary share capital but only 75% of voting rights.
Answer: B
Conceptual Explanation: For group relief, the parent must own at least 75% of the
ordinary share capital and also meet the economic benefits test (75% of profits and assets).
2. Under the cash basis for small businesses, how is the purchase of a car treated for tax
purposes?
A. Fully expensed in the year of purchase.
B. Disallowed entirely as a private expense.
C. Deducted as a revenue expense if CO2 emissions are low.
,D. Treated under the capital allowance rules (Writing Down Allowance).
Answer: D
Conceptual Explanation: Even under the cash basis, cars are specifically excluded from
being treated as a revenue expense and must follow capital allowance rules.
3. What is the maximum amount of ‘sideways loss relief’ an individual can claim against
general income in a tax year?
A. £50,000 only.
B. 25% of adjusted total income only.
C. The higher of £50,000 or 25% of adjusted total income.
D. The lower of £50,000 or 25% of adjusted total income.
Answer: C
Conceptual Explanation: The cap on income tax reliefs is the higher of £50,000 or 25% of
adjusted total income, as per s24A ITA 2007.
4. For Inheritance Tax purposes, what is the ‘taper relief’ percentage applied to a gift made
between 5 and 6 years before death?
A. 60%
B. 40%
C. 20%
D. 80%
, Answer: A
Conceptual Explanation: Taper relief for gifts 5-6 years before death reduces the tax
charge by 60% (meaning only 40% of the full tax is payable).
5. Which of the following is NOT a requirement for Business Asset Disposal Relief (BADR)?
A. The individual must be an officer or employee of the company.
B. The individual must hold at least 10% of the ordinary share capital.
C. The company must be a trading company.
D. The individual must have held the shares for at least 24 months.
Answer: B
Conceptual Explanation: The minimum shareholding requirement for BADR is 5%, not
10%.
6. In a Value Added Tax (VAT) context, what is the ‘Option to Tax’ primarily used for?
A. Converting exempt supplies of residential land to taxable supplies.
B. Reclaiming VAT on international flight costs.
C. Reducing the VAT rate from 20% to 5%.
D. Converting exempt supplies of commercial land to taxable supplies.
Answer: D
TEST 3 QUESTIONS AND ANSWERS
1. Which of the following conditions must be met for a company to be considered a ‘75%
subsidiary’ for group relief purposes?
A. The parent must own at least 75% of the ordinary share capital only.
B. The parent must own at least 75% of the ordinary share capital and be entitled to 75%
of profits and assets on winding up.
C. The parent must own 51% of the ordinary share capital and 75% of the voting rights.
D. The parent must own 100% of the ordinary share capital but only 75% of voting rights.
Answer: B
Conceptual Explanation: For group relief, the parent must own at least 75% of the
ordinary share capital and also meet the economic benefits test (75% of profits and assets).
2. Under the cash basis for small businesses, how is the purchase of a car treated for tax
purposes?
A. Fully expensed in the year of purchase.
B. Disallowed entirely as a private expense.
C. Deducted as a revenue expense if CO2 emissions are low.
,D. Treated under the capital allowance rules (Writing Down Allowance).
Answer: D
Conceptual Explanation: Even under the cash basis, cars are specifically excluded from
being treated as a revenue expense and must follow capital allowance rules.
3. What is the maximum amount of ‘sideways loss relief’ an individual can claim against
general income in a tax year?
A. £50,000 only.
B. 25% of adjusted total income only.
C. The higher of £50,000 or 25% of adjusted total income.
D. The lower of £50,000 or 25% of adjusted total income.
Answer: C
Conceptual Explanation: The cap on income tax reliefs is the higher of £50,000 or 25% of
adjusted total income, as per s24A ITA 2007.
4. For Inheritance Tax purposes, what is the ‘taper relief’ percentage applied to a gift made
between 5 and 6 years before death?
A. 60%
B. 40%
C. 20%
D. 80%
, Answer: A
Conceptual Explanation: Taper relief for gifts 5-6 years before death reduces the tax
charge by 60% (meaning only 40% of the full tax is payable).
5. Which of the following is NOT a requirement for Business Asset Disposal Relief (BADR)?
A. The individual must be an officer or employee of the company.
B. The individual must hold at least 10% of the ordinary share capital.
C. The company must be a trading company.
D. The individual must have held the shares for at least 24 months.
Answer: B
Conceptual Explanation: The minimum shareholding requirement for BADR is 5%, not
10%.
6. In a Value Added Tax (VAT) context, what is the ‘Option to Tax’ primarily used for?
A. Converting exempt supplies of residential land to taxable supplies.
B. Reclaiming VAT on international flight costs.
C. Reducing the VAT rate from 20% to 5%.
D. Converting exempt supplies of commercial land to taxable supplies.
Answer: D
