ACCA ATX: Advanced Taxation Practice Questions

Answered 0 · Correct 0

1. Tax Planning Concepts easy

   The fundamental distinction between tax evasion and tax avoidance is that:

   A Avoidance is criminal while evasion is merely administrative B Evasion involves illegally concealing or misrepresenting facts, while avoidance uses legal means to reduce tax C Both are equally legal provided a suitably qualified professional adviser has reviewed the arrangement and formally approved it in writing D Evasion applies only to companies and avoidance only to individuals

2. Tax Planning Concepts easy

   Transfers of assets between spouses or civil partners are useful in tax planning mainly because such transfers:

   A Are always subject to double taxation B Convert capital into income automatically C Remove the asset from every future tax charge permanently D Are broadly tax-neutral, allowing income and gains to be spread so that each partner's allowances and lower rate bands can be used

3. Tax Planning Concepts easy

   Deferring the disposal of a chargeable asset until early in the next tax year can be attractive because it:

   A Removes the gain from the scope of capital taxation entirely, because a disposal made in a later year falls outside the earlier year's charge B Means the gain never has to be reported C Delays the payment date for the tax and may allow a fresh annual exemption or lower-rate capacity to be used D Converts a capital gain into exempt income

4. Tax Planning Concepts medium

   Why does the distinction between income and capital matter so much in tax planning?

   A Income and capital receipts are charged under different taxes with different rates, reliefs and exemptions B Capital receipts are always tax-free C Income is only taxed when it is spent D The distinction affects accounting records but never the tax payable

5. Tax Planning Concepts medium

   When comparing extracting profit from a company as salary versus dividends, a key structural difference is that:

   A Dividends are deductible in computing the company's taxable profits, while salary must always be paid out of profits that have already suffered corporation tax B Salary is always tax-free in the director's hands C Dividends always carry national insurance contributions D Salary is deductible for the company and attracts national insurance, whereas dividends come from post-tax profits free of national insurance

6. Tax Planning Concepts medium

   Making personal pension contributions can reduce an individual's overall tax burden because contributions:

   A Are ignored for all tax purposes B Attract tax relief and can extend the band taxed at lower rates, as well as restoring allowances that are tapered away at higher income levels C Convert employment income into exempt capital D Remove the need to file a tax return

7. Tax Planning Concepts hard

   The planning logic behind making lifetime gifts to individuals for inheritance tax purposes is that such gifts:

   A Become fully exempt if the donor survives for the statutory period after making the gift B Are taxed immediately at the full death rate C Always remain within the donor's death estate for tax purposes regardless of how long before death the gift was made D Are only effective if made through a company

8. Tax Planning Concepts medium

   A small business whose customers are mainly VAT-registered companies may choose to register for VAT before it is required to, because voluntary registration:

   A Exempts the business from charging VAT forever B Is only allowed for retailers C Allows recovery of input VAT on purchases, while business customers can themselves recover the VAT charged to them D Removes the requirement to keep VAT records

9. Tax Planning Concepts hard

   A general anti-abuse rule (GAAR) is designed to:

   A Outlaw every arrangement that reduces a taxpayer's liability, so that any planning producing a tax saving can be struck down by the tax authority as a matter of course B Counteract arrangements that are abusive - ones that cannot be regarded as a reasonable course of action in relation to the tax legislation C Replace all specific anti-avoidance legislation D Apply only to transactions carried out abroad

10. Interaction of Reliefs easy

    When several capital tax reliefs could apply to the same transaction, careful planning is needed because:

    A All reliefs are always claimed automatically in the taxpayer's favour B Reliefs can be combined freely without any effect on each other C Claiming reliefs is compulsory in every case D Claiming one relief can reduce, defer or block the benefit of another, so the combined outcomes must be compared before choosing

11. Interaction of Reliefs easy

    Rollover relief on the replacement of qualifying business assets works by:

    A Deferring the gain by deducting it from the base cost of the replacement asset B Exempting the gain permanently with no conditions attached as to the type of asset acquired or the period within which reinvestment occurs C Converting the gain into taxable income D Transferring the gain to the purchaser of the old asset

12. Interaction of Reliefs medium

    Gift holdover relief on a qualifying gift of business assets means that:

    A The donor pays tax immediately at a reduced rate B The donee receives the asset with a base cost equal to full market value C The donor's gain is held over, reducing the donee's base cost so the gain is effectively taxed when the donee later disposes of the asset D The gain disappears permanently for both parties

13. Interaction of Reliefs medium

    A capital gains relief for disposals of qualifying business interests applies a reduced tax rate up to a lifetime limit. In planning terms this means:

    A The relief can be used on unlimited gains forever B The relief converts qualifying gains into exempt income C Spreading qualifying disposals across spouses who each meet the conditions can multiply the total gains relieved at the reduced rate D The relief is applied automatically by the tax authority without the taxpayer needing to make a claim or satisfy any qualifying conditions over a minimum period

14. Interaction of Reliefs medium

    Business property relief for inheritance tax operates by:

    A Reducing the taxable value of qualifying business property transferred, provided ownership and trading conditions are met B Refunding tax previously paid on lifetime gifts of any asset C Exempting all company shares of every kind D Deferring inheritance tax until the business is eventually sold

15. Interaction of Reliefs medium

    When deciding whether to gift an asset during lifetime or retain it until death, a key capital gains tax consideration is that:

    A Lifetime gifts always escape both capital gains tax and inheritance tax, whatever the asset and however soon before death they are made B Assets held at death are rebased to market value, wiping out accrued gains, while a lifetime gift is a disposal at market value C Death triggers an immediate capital gains tax charge on the whole estate D The capital gains tax position is identical whichever route is chosen

16. Interaction of Reliefs hard

    Claiming gift holdover relief on a lifetime transfer can be a poor choice where the donor is elderly because:

    A Holdover relief is unavailable to older taxpayers B The relief increases the tax rate charged on the donee C Held-over gains always become taxable income of the donee D Retaining the asset until death would rebase it to market value and wipe out the gain, whereas holdover merely defers a gain that will still be taxed on the donee

17. Interaction of Reliefs hard

    In choosing how to relieve a trading loss, an unincorporated trader should primarily compare:

    A The marginal rates in the years the loss could be set against, the timing of any repayment, and any allowances each claim would waste B Only the absolute size of the loss itself C The alphabetical order of the available claims D The stated preference of the tax authority, whose published guidance is understood to direct taxpayers towards the claim the authority itself considers most appropriate

18. Interaction of Reliefs hard

    Incorporation relief defers gains when an unincorporated business is transferred to a company wholly or partly in exchange for shares. A taxpayer might elect to disapply the relief because:

    A The relief always increases the immediate tax bill B Crystallising a gain now - for example one covered by other reliefs or the annual exemption - preserves a higher base cost in the shares for a planned future sale C Disapplying the relief exempts the shares from all future taxation D The relief cannot apply where any shares are issued

19. Group & Loss Relief Concepts easy

    Group relief for corporation tax allows:

    A Any company to surrender its losses to any other company that is resident in the same country, whether or not the two are connected with each other in any way B Losses to be sold at auction to unrelated companies C A company to surrender qualifying losses to another company in the same qualifying group, to set against that company's taxable profits D Individuals to claim company losses against their employment income

20. Group & Loss Relief Concepts easy

    If a company cannot use a trading loss in the current period, the general concept of carry-forward relief is that the loss:

    A Expires immediately and is wasted B Is refunded in cash by the tax authority C Must be transferred to the company's shareholders D Can be carried forward and set against future profits, subject to conditions and restrictions on use

21. Group & Loss Relief Concepts medium

    Within a capital gains group, chargeable assets can be transferred between member companies:

    A Only at full open market value, with an immediate corporation tax charge arising on the transferring company at the moment the asset changes hands B Only if both companies are dormant C With the gain split equally between the two companies D On a no-gain, no-loss basis, deferring any gain until the asset leaves the group or the holding company sells the member

22. Group & Loss Relief Concepts medium

    A practical trap in group tax planning is that:

    A The definitions of a group are identical for every tax purpose B The ownership definitions for group loss relief and for capital gains groups differ, so companies can qualify as a group for one purpose but not the other C Group relationships are ignored by all anti-avoidance rules D Only wholly owned subsidiaries can ever be members of any group

23. Group & Loss Relief Concepts medium

    When allocating surrendered losses among group companies, the group should generally prioritise:

    A Setting losses against profits that would otherwise bear the highest effective marginal rate, without wasting other deductions B Spreading the loss in equal shares across all the companies in the group regardless of their individual tax positions, to be seen to treat every member fairly C The company whose name comes first alphabetically D Companies that have no taxable profits at all

24. Group & Loss Relief Concepts medium

    Consortium relief differs from standard group relief in that:

    A It allows unlimited loss transfers between entirely unconnected companies B It applies only to overseas companies C Loss sharing between a consortium-owned company and its members is restricted by reference to each member's interest in that company D It removes the need for any ownership relationship at all

25. Group & Loss Relief Concepts hard

    Anti-avoidance rules that apply on a change in company ownership are aimed at:

    A Preventing 'loss buying' by restricting carried-forward losses where ownership changes alongside a major change in the trade B Stopping companies from ever being sold C Ensuring that accumulated losses transfer automatically to the new owners so that relief is never lost when a company changes hands D Taxing the seller twice on the sale proceeds

26. Group & Loss Relief Concepts hard

    A degrouping charge can arise when:

    A A company declares a dividend to its parent B Two group companies merge their trades C A company leaves a group still holding an asset it received from another group company on a no-gain, no-loss transfer within a defined recent period D A group company changes its accounting date

27. Group & Loss Relief Concepts hard

    When a company with accumulated losses is acquired into a new group, the general policy behind restricting the use of its pre-acquisition losses is that:

    A Losses should always follow the shareholders who originally suffered them B Relief should remain tied to the economic activity that generated the losses, rather than becoming a purchasable tax asset for sheltering the acquirer's other profits C All pre-acquisition losses become fully and immediately available on acquisition D The acquiring group must be compensated in cash for any unusable losses

28. Overseas & Residence Concepts easy

    For an individual, the significance of being tax resident in a country is typically that:

    A Residence affects only social security, never income tax B Non-residents can never be taxed on anything at all in that country, however much of their income is derived from sources located within it C Residents pay tax only on their investment income D Residents are generally taxable on worldwide income, while non-residents are generally taxable only on income arising in that country

29. Overseas & Residence Concepts easy

    Double tax relief by credit works on the principle that:

    A The taxpayer chooses which country's tax system to ignore completely B Foreign tax paid on the same income is credited against the home country liability, usually capped at the home tax attributable to that income C Both countries refund all the tax they collected D The income is exempted from tax in both countries simultaneously

30. Overseas & Residence Concepts medium

    The UK statutory residence test is structured as:

    A A sequence of automatic overseas tests, then automatic UK tests, then a sufficient ties test comparing connections with time spent in the UK B A single question about where the individual holds citizenship C An annual discretionary decision by the tax authority D A test based solely on the place where the individual's employer happens to be incorporated, on the theory that personal residence follows the employment relationship

31. Overseas & Residence Concepts medium

    Whether an individual's overseas assets fall within the scope of UK inheritance tax depends primarily on:

    A The currency in which the assets are denominated B Whether the assets produce income C The size of each individual asset D The individual's long-term personal connection with the UK under the rules in force, whereas assets situated in the UK are within scope regardless

32. Overseas & Residence Concepts medium

    A company trading into a foreign country generally becomes taxable on its trading profits there only if it:

    A Makes any sale at all to customers in that country B Uses the country's currency on its invoices C Has a permanent establishment there, such as a fixed place of business or a dependent agent habitually concluding contracts D Employs any person who has ever visited that country

33. Overseas & Residence Concepts medium

    Controlled foreign company (CFC) rules exist to:

    A Discourage the diversion of profits to low-tax jurisdictions by attributing certain profits of controlled overseas companies back home B Prevent companies from establishing or retaining any overseas subsidiaries, so that all corporate activity stays within the home country's jurisdiction C Give tax refunds for overseas investment D Regulate the accounting treatment of foreign currencies

34. Overseas & Residence Concepts hard

    The arm's length principle in international taxation requires that:

    A Group companies charge each other nothing for intra-group services B Transactions between connected parties are priced as they would be between independent enterprises, with profits adjusted for tax purposes where they are not C All group profits are taxed in the country where the parent is listed D Prices for cross-border transactions are set by the customs authority

35. Overseas & Residence Concepts hard

    When a company chooses between operating abroad through a branch or a subsidiary, a relevant tax consideration is that:

    A A branch is always taxed twice with no relief available B A subsidiary's profits are automatically taxed in the parent's country as they arise, in every case and regardless of any double tax treaty in force C Branch results generally form part of the home company's own computation, while a subsidiary is separate and its dividends may be exempt D The legal form chosen makes no difference to any tax outcome

36. Overseas & Residence Concepts hard

    Where a company is treated as resident in two countries at once, double tax treaties typically resolve the conflict by:

    A Deferring to the country where the company was first registered, in every treaty B Awarding residence to the country with the larger economy C Splitting the company's profits equally between the two countries D Tie-breaker provisions, commonly looking to the place of effective management or requiring the two authorities to reach agreement

37. Ethics of Tax Advice easy

    The fundamental ethical principles that govern a professional accountant giving tax advice include:

    A Profit maximisation, loyalty and secrecy B Novelty, efficiency and speed C Integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour D Advocacy, aggression and ambition

38. Ethics of Tax Advice easy

    A tax adviser's duty of confidentiality to a client:

    A Is not absolute - disclosure may be required by law, for example under anti-money laundering legislation B Can never be broken in any circumstances C Ends as soon as the professional engagement ends, after which anything learned during the work may be freely shared with third parties D Applies only to written information, not to conversations

39. Ethics of Tax Advice medium

    A client refuses to correct a material error in an earlier tax return after the adviser has explained the consequences. The adviser should:

    A Correct the return personally without telling the client B Report the client directly to the press C Continue acting for the client as if nothing had happened D Consider ceasing to act, and assess whether a report is required under anti-money laundering obligations, taking care not to tip off the client

40. Ethics of Tax Advice medium

    If an adviser forms a suspicion that a client has deliberately evaded tax, the adviser is generally required to:

    A Confront the client openly about the suspicion at the earliest possible opportunity, so that the client has a fair chance to explain the position before anything is reported B Make a report under money laundering legislation to the appropriate officer or authority, and avoid alerting the client to the report C Notify the client's bank immediately D Take no action if the amounts involved appear small

41. Ethics of Tax Advice medium

    Where a firm is asked to advise both parties to the same transaction, the firm should first:

    A Accept without hesitation, because acting for more parties gives better insight B Evaluate the conflict of interest and either implement effective safeguards with the informed consent of both parties, or decline to act for one or both C Automatically resign from both engagements without any analysis D Charge both parties a premium fee to compensate for the risk

42. Ethics of Tax Advice medium

    Professional guidance on giving tax planning advice requires, among other things, that:

    A Advisers promote any scheme that reduces tax, however contrived B Advice need not be documented provided it is given orally C Advisers personally guarantee the tax outcome of their advice D Advice is specific to the client, supported by the law and the disclosed facts, and does not rely on the tax authority failing to notice weaknesses in an arrangement

43. Ethics of Tax Advice hard

    When a tax adviser represents a client in a dispute with the tax authority, the main ethical threat to manage is:

    A Advocacy - promoting the client's position so strongly that objectivity and professional judgement become compromised B Familiarity with the tax legislation itself C Self-review arising from the adviser having to evaluate and challenge the tax authority's own earlier decisions in the same matter D Intimidation of the adviser by the general public

44. Ethics of Tax Advice hard

    Regimes that require promoters to disclose certain tax avoidance arrangements to the tax authority are designed to:

    A Pre-approve schemes so that users are protected from later challenge B Make all disclosed schemes automatically effective C Give the authority early information about arrangements bearing avoidance hallmarks, so it can respond quickly, including by changing the law D Punish taxpayers for taking any professional advice

45. Ethics of Tax Advice hard

    Before accepting a new tax client, a professional firm should:

    A Complete client due diligence including identity verification, assess integrity and engagement risk, and communicate with the previous adviser after obtaining the client's permission B Begin the work immediately and complete the formalities later C Rely entirely on the client's own assurances about their affairs D Request the previous adviser's files without the client's knowledge

Practice questions FAQ

Are these real ACCA ATX exam questions?

No. These are original study questions written to test understanding of the syllabus. They are not real exam questions, exam dumps, or copied from any provider.

How should I use these ATX practice questions?

Answer each one, read the explanation (including why the wrong options are wrong), and use the per-area score below to focus your revision. Revisit before exam day.

Is this enough practice for ATX?

Treat it as a concept check, not a full mock. Pair it with past papers and specimen exams from ACCA and approved content providers - the real paper also tests longer, applied question styles.

What score means I am ready?

A good signal is consistently scoring around 80% or higher across every syllabus area on questions you have not seen before, and being able to explain why the wrong options are wrong.

Should I use exam dumps?

No. Dumps (real or leaked questions) breach provider policy, can void your qualification, and do not build the understanding the exam actually tests.

Sources

• ACCA - Qualification overview ↗