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ICAB PL Business Planning: Taxation and Compliance study materials
ICAB PL Business Planning: Taxation and Compliance study resources

ICAB PL Business Planning: Taxation and Compliance practice questions

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Question 1Taxation of Individuals

Under the basic rate band structure for a UK resident individual, income tax on non-savings, non-dividend income within the basic rate band is charged at which rate?

  1. 0%
  2. 45%
  3. 20% Correct answer.
  4. 40%

Explanation

Non-savings income falling within the basic rate band is taxed at the basic rate of 20%. Higher and additional rates apply only to income above the basic rate limit. The 0% rate applies to the personal allowance, not to taxable income in the basic band.

Question 2Taxation of Individuals

A UK resident individual receives a cash gift of £5,000 from a parent. How is this gift treated for income tax purposes?

  1. It is taxable as trading income
  2. It is exempt because gifts of capital are not income Correct answer.
  3. It is taxable as savings income
  4. It is taxable as miscellaneous income

Explanation

A gift of cash is a capital receipt in the hands of the recipient and does not constitute income. Income tax applies to income, not to gratuitous capital transfers. No statutory charge therefore arises on the recipient.

Question 3Taxation of Individuals

For a UK resident individual, the personal allowance is normally withdrawn where adjusted net income exceeds which threshold?

  1. £60,000
  2. £125,140
  3. £100,000 Correct answer.
  4. £50,270

Explanation

The personal allowance is reduced by £1 for every £2 of adjusted net income above £100,000. It is fully withdrawn once adjusted net income reaches £125,140. The £50,270 figure is the basic rate limit, not the allowance taper threshold.

Question 4Taxation of Individuals

A taxpayer's savings income includes interest received net of tax deducted at source. In which order is savings income taxed relative to non-savings income?

  1. Before non-savings income
  2. At the same time as non-savings income
  3. After dividend income
  4. After non-savings income but before dividend income Correct answer.

Explanation

Income tax is applied in a set order: non-savings income first, then savings income, then dividend income. Savings income therefore sits above non-savings income but below dividends. This ordering determines which rate bands each type of income falls into.

Question 5Taxation of Individuals

Which of the following best describes the starting rate for savings available to a low-income individual?

  1. A 0% band of up to £5,000 available where non-savings income is below the band limit Correct answer.
  2. A 10% band available to all taxpayers
  3. A 20% band available only to pensioners
  4. A 0% band available only to non-residents

Explanation

The starting rate for savings provides a 0% band of up to £5,000 where non-savings income is below the sum of the personal allowance and the band. It is targeted at low-income individuals. The band is reduced by non-savings income above the personal allowance.

Question 6Taxation of Individuals

An individual sells a personal asset and makes a capital gain. Which tax applies to that gain?

  1. Income tax
  2. Capital gains tax Correct answer.
  3. Stamp duty land tax
  4. Inheritance tax

Explanation

Gains on the disposal of chargeable assets are subject to capital gains tax, not income tax. Income tax applies to income receipts. Inheritance tax and stamp duty land tax apply to different events.

Question 7Taxation of Individuals

A UK resident individual has taxable income of £30,000, all non-savings income, after the personal allowance. What is the income tax liability at basic rate?

  1. £6,000 Correct answer.
  2. £4,500
  3. £9,000
  4. £12,000

Explanation

All £30,000 falls within the basic rate band, so the liability is £30,000 × 20% = £6,000. The higher rate does not apply because taxable income is below the basic rate limit. The personal allowance has already been deducted.

Question 8Taxation of Individuals

Which of the following is treated as exempt income for income tax purposes?

  1. Interest on a National Savings and Investments Premium Bond prize Correct answer.
  2. Rental income from a let property
  3. Dividends from a UK company
  4. Interest on a bank savings account

Explanation

Premium Bond prizes are specifically exempt from income tax. Bank interest, dividends and rental income are all chargeable to income tax. Exemption depends on a specific statutory rule.

Question 9Taxation of Individuals

A higher rate taxpayer receives £1,000 of bank interest in 2023/24. What is the personal savings allowance available to that individual?

  1. £500 Correct answer.
  2. £0
  3. £5,000
  4. £1,000

Explanation

The personal savings allowance is £500 for higher rate taxpayers and £1,000 for basic rate taxpayers. Additional rate taxpayers receive nil. The allowance taxes the relevant savings income at 0%.

Question 10Taxation of Individuals

A taxpayer has non-savings income of £40,000 and savings income of £3,000. Assuming the personal allowance is fully available and the basic rate limit is £37,700, how much of the savings income falls within the basic rate band?

  1. £2,300
  2. £3,000
  3. £0
  4. £700 Correct answer.

Explanation

After the personal allowance of £12,570, taxable non-savings income is £27,430. The remaining basic rate band is £37,700 − £27,430 = £10,270, so all £3,000 of savings income falls within the basic band. The figures in the other options misapply the band limit.

Question 11Taxation of Individuals

For 2023/24, the dividend allowance for an individual is which amount?

  1. £500
  2. £1,000 Correct answer.
  3. £2,000
  4. £5,000

Explanation

The dividend allowance was reduced to £1,000 for 2023/24. Dividends within the allowance are taxed at 0%, but they still use up band capacity. The allowance is separate from the personal savings allowance.

Question 12Taxation of Individuals

An additional rate taxpayer receives dividend income. Which rate applies to dividends above the dividend allowance?

  1. 33.75%
  2. 39.35% Correct answer.
  3. 45%
  4. 38.1%

Explanation

Dividend rates are 8.75% for basic rate, 33.75% for higher rate and 39.35% for additional rate taxpayers. The 45% rate applies to non-savings and savings income, not dividends. The dividend rates are set lower to reflect the notional tax credit.

Question 13Taxation of Individuals

A self-employed individual has trading profits. Which basis of assessment generally applies to the trading profits of a continuing sole trader?

  1. The tax year basis, with profits of the tax year assessed Correct answer.
  2. The previous year basis
  3. The remittance basis
  4. The cash basis only

Explanation

Following reform, the tax year basis applies so that the profits of the tax year itself are assessed. The previous year basis was largely replaced. The cash basis is an optional simplification, not the general rule.

Question 14Taxation of Individuals

A UK resident individual lets a furnished residential property. Which of the following is generally deductible in computing property income?

  1. Capital repayment of the mortgage
  2. Capital cost of acquiring the property
  3. Personal drawings of the landlord
  4. Replacement of domestic items relief for worn-out furniture Correct answer.

Explanation

Replacement of domestic items relief allows a deduction for replacing furniture and furnishings in let residential property. Capital costs of acquisition and capital mortgage repayments are not deductible. Personal drawings are not an expense of the business.

Question 15Taxation of Individuals

An employee receives a company car with a list price of £30,000 and a benefit-in-kind percentage of 20%. What is the taxable benefit in kind?

  1. £30,000
  2. £6,000 Correct answer.
  3. £600
  4. £3,000

Explanation

The taxable benefit is the list price multiplied by the appropriate percentage: £30,000 × 20% = £6,000. The benefit is then subject to income tax for the employee. The other figures misapply the percentage.

Question 16Taxation of Individuals

Which of the following best describes the employment allowance for 2023/24?

  1. A deduction against the employee's primary NIC liability
  2. A relief available only to charities
  3. An income tax relief for employees
  4. A deduction of up to £5,000 against an employer's secondary Class 1 NIC liability Correct answer.

Explanation

The employment allowance reduces an employer's secondary Class 1 NIC liability by up to £5,000 for 2023/24. It is not available to employees and is not an income tax relief. It applies to eligible employers, not only charities.

Question 17Taxation of Individuals

A taxpayer makes a gift aid donation of £800 to a charity. What is the grossed-up value of the donation for tax purposes?

  1. £800
  2. £640
  3. £1,000 Correct answer.
  4. £1,280

Explanation

A gift aid donation is grossed up at the basic rate: £800 ÷ 0.8 = £1,000. The gross amount extends the donor's basic rate band. The other figures apply the wrong factor.

Question 18Taxation of Individuals

A UK resident individual has a capital gain on the disposal of shares in 2023/24. The annual exempt amount for that year is which amount?

  1. £12,300
  2. £1,000
  3. £6,000 Correct answer.
  4. £3,000

Explanation

The annual exempt amount for capital gains tax was reduced to £6,000 for 2023/24. It was further reduced to £3,000 for 2024/25. The £12,300 figure applied in earlier years.

Question 19Taxation of Individuals

An individual disposes of a residential property that has been their only home throughout ownership. Which relief is likely to eliminate the capital gain?

  1. Private residence relief Correct answer.
  2. Gift relief
  3. Rollover relief
  4. Business asset disposal relief

Explanation

Private residence relief exempts gains on a dwelling house that has been the individual's only or main residence throughout the period of ownership. Business asset disposal relief and rollover relief apply to other circumstances. Gift relief applies to gifts of business assets.

Question 20Taxation of Individuals

A taxpayer has unused basic rate band capacity and makes a gift aid donation. What is the effect of the gross gift aid donation on the basic rate band?

  1. It creates a tax credit against NIC
  2. It has no effect on the band
  3. It reduces the personal allowance
  4. It extends the basic rate band by the gross amount of the donation Correct answer.

Explanation

The grossed-up gift aid donation extends the basic rate band, allowing more income to be taxed at the basic rate. It does not reduce the personal allowance. The extension benefits higher rate donors.

Question 21Taxation of Individuals

An individual has adjusted net income of £110,000. By how much is the personal allowance reduced?

  1. £2,500
  2. £10,000
  3. £5,000 Correct answer.
  4. £12,570

Explanation

The allowance is reduced by £1 for every £2 above £100,000: (£110,000 − £100,000) ÷ 2 = £5,000. The remaining allowance is therefore £7,570. The other figures misapply the taper.

Question 22Taxation of Individuals

A higher rate taxpayer makes a gross gift aid donation of £2,000. What additional tax relief can the taxpayer claim through self assessment?

  1. £200, being the basic rate on the gross donation
  2. £800, being the higher rate on the gross donation
  3. Nil, because gift aid relief is given only to the charity
  4. £400, being the difference between the 40% higher rate and the 20% basic rate on the gross donation Correct answer.

Explanation

The charity reclaims basic rate tax, and the higher rate taxpayer claims the difference between the higher and basic rates: £2,000 × (40% − 20%) = £400. The relief is given by extending the basic rate band. The other figures misstate the differential.

Question 23Taxation of Individuals

An individual has non-savings income of £45,000 and dividend income of £5,000 in 2023/24. Assuming the personal allowance is fully available and the basic rate limit is £37,700, how much dividend income is taxed at the higher dividend rate?

  1. £5,000 Correct answer.
  2. £2,430
  3. £3,000
  4. £0

Explanation

Taxable non-savings income is £45,000 − £12,570 = £32,430, leaving £5,270 of basic band. The £1,000 dividend allowance uses part of that band, and the remaining £4,000 of dividends falls above the basic limit, so all £5,000 of dividends are taxed at higher dividend rates (with £1,000 at 0%).

Question 24Taxation of Individuals

A sole trader makes a trading loss in the current year. Which relief allows the loss to be carried forward against future profits of the same trade?

  1. Loss relief against capital gains
  2. Carry-back against general income
  3. Carry-forward loss relief against subsequent profits of the same trade Correct answer.
  4. Terminal loss relief

Explanation

A trading loss may be carried forward and set against subsequent profits of the same trade. Terminal loss relief applies on cessation, and carry-back against general income is a different relief. Loss relief against capital gains applies to trading losses in limited circumstances.

Question 25Taxation of Individuals

A UK resident individual receives rental income of £12,000 and allowable property expenses of £3,000. What is the taxable property income before any reliefs?

  1. £9,000 Correct answer.
  2. £15,000
  3. £12,000
  4. £3,000

Explanation

Taxable property income is rental income less allowable expenses: £12,000 − £3,000 = £9,000. The personal allowance may then apply. The other figures add instead of deduct or use the wrong base.

Question 26Taxation of Individuals

An employee receives free accommodation from an employer. In which circumstance is the accommodation generally treated as a taxable benefit?

  1. When the accommodation is necessary for the employee's security and the employment is a threat to their safety
  2. When the accommodation is provided rent-free and the employee pays no rent Correct answer.
  3. When the employer requires the employee to live on the premises for the proper performance of the job
  4. When the employee is a director of a charity and the accommodation is provided for the charity's purposes

Explanation

Accommodation is a taxable benefit where it is provided by reason of the employment and none of the statutory exemptions apply. Exemptions exist where the employer requires the employee to live on the premises for the proper performance of the duties, or where the accommodation is provided for security reasons. Rent-free accommodation without such a qualifying exemption is chargeable.

Question 27Taxation of Individuals

An employee is provided with an interest-free loan of £12,000 by their employer throughout the tax year. The official rate of interest is 2%. What is the taxable benefit of the loan?

  1. £0
  2. £12,000
  3. £120
  4. £240 Correct answer.

Explanation

A beneficial loan gives rise to a taxable benefit equal to the interest that would have been payable at the official rate less any interest actually paid. £12,000 at 2% gives £240, and no interest was paid. The benefit is therefore £240.

Question 28Taxation of Individuals

Which of the following describes the basis on which the cash basis for computing trading profits operates?

  1. Receipts and expenses are recognised when cash is received or paid, subject to eligibility limits Correct answer.
  2. Receipts are recognised when earned and expenses when incurred, with no cash adjustment
  3. Profits are computed on accruals with adjustments for capital allowances only
  4. Profits are computed on the same basis as for company accounts under accounting standards

Explanation

The cash basis recognises income and expenses by reference to cash movements rather than accruals. It is available to unincorporated businesses within the eligibility thresholds. The accruals basis is the alternative default treatment.

Question 29Taxation of Individuals

A sole trader has a trading loss of £20,000 in the current year and wishes to carry it forward against future profits of the same trade. Which relief applies?

  1. Carry-forward trade loss relief against subsequent profits of the same trade Correct answer.
  2. Relief against total income of the current year only
  3. Terminal loss relief in the final twelve months of trading
  4. Relief against chargeable gains of the current year

Explanation

A trading loss may be carried forward and set against future profits of the same trade under the carry-forward trade loss relief rules. This relief is available without a time limit and is applied to subsequent profits of the trade. It is distinct from current-year reliefs and terminal loss relief.

Question 30Taxation of Individuals

An individual receives rental income of £15,000 and incurs allowable property expenses of £4,000. What is the taxable property income before any reliefs?

  1. £15,000
  2. £11,000 Correct answer.
  3. £19,000
  4. £4,000

Explanation

Property income is taxed on the profits, being rental receipts less allowable expenses. £15,000 less £4,000 gives £11,000. The gross rent and the expenses individually are not the taxable amount.

Question 31Taxation of Individuals

An individual makes a trading loss and claims relief against their total income of the same year. What is the effect of this claim?

  1. The loss is set against capital gains rather than income
  2. The loss is deducted from total income before the personal allowance is applied Correct answer.
  3. The loss is carried forward automatically without any claim
  4. The loss is deducted only after the personal allowance has been applied

Explanation

Where a loss is relieved against total income, it is deducted in arriving at net income before the personal allowance is set against that income. This can increase the amount of personal allowance available. Relief against capital gains is a separate matter.

Question 32Taxation of Individuals

An individual makes a qualifying investment under the Seed Enterprise Investment Scheme. Which tax relief is available to the investor?

  1. Relief against inheritance tax only
  2. A deduction from trading profits of the investee company
  3. Income tax relief at 50% of the amount invested, subject to a cap Correct answer.
  4. A capital gains tax exemption on all future gains

Explanation

SEIS provides income tax relief at 50% of the amount subscribed for qualifying shares, subject to an annual investment limit. The relief reduces the investor's income tax liability. It is not a deduction for the company and is not limited to inheritance tax.

Question 33Taxation of Individuals

An individual disposes of qualifying shares held under the Enterprise Investment Scheme after three years. Which capital gains treatment generally applies to a gain on those shares?

  1. The gain is charged at the additional rate without any relief
  2. The gain is always charged at the dividend upper rate
  3. The gain is exempt only if reinvested in the same company
  4. The gain may be exempt if the shares were held for the qualifying period and relief was obtained Correct answer.

Explanation

Gains on EIS shares that have been held for the qualifying period and on which income tax relief was obtained and not withdrawn may be exempt from capital gains tax. The relief depends on meeting the qualifying conditions. It is not conditional on reinvestment in the same company.

Question 34Taxation of Individuals

An individual is a member of a registered pension scheme and makes a personal contribution of £8,000 net. What is the gross contribution for tax purposes?

  1. £8,000
  2. £10,000 Correct answer.
  3. £6,400
  4. £12,800

Explanation

Personal pension contributions are made net of basic rate relief, and the gross contribution is the net amount grossed up at the basic rate. £8,000 divided by 0.8 gives £10,000. The gross figure is used to determine higher rate relief and annual allowance usage.

Question 35Taxation of Individuals

An employee is provided with a beneficial loan of £25,000 at an official rate of 2.5%, and pays interest of £200. What is the taxable benefit?

  1. £25,000
  2. £425 Correct answer.
  3. £625
  4. £200

Explanation

The benefit is the interest at the official rate less interest actually paid. £25,000 at 2.5% is £625, less £200 paid, giving £425. The loan principal is not itself the benefit.

Question 36Taxation of Individuals

Which of the following payments is generally treated as exempt from income tax?

  1. A salary sacrifice received as cash
  2. A commission earned on sales
  3. A statutory redundancy payment within the statutory limits Correct answer.
  4. A bonus paid in recognition of performance

Explanation

Statutory redundancy payments within the statutory limits are exempt from income tax. Performance bonuses, commissions and cash salary are taxable earnings. Exemptions apply to specific statutory payments rather than to general employment rewards.

Question 37Taxation of Individuals

An individual has adjusted net income of £125,000. By how much is the personal allowance reduced?

  1. £0
  2. £12,500 Correct answer.
  3. £25,000
  4. £6,250

Explanation

The personal allowance is reduced by £1 for every £2 of adjusted net income above £100,000. Income above the threshold is £25,000, so the reduction is £12,500. The allowance is reduced to nil only once income reaches the upper limit.

Question 38Taxation of Individuals

An individual makes a gift of shares to an adult child. For inheritance tax purposes, which treatment generally applies if the individual survives seven years after the gift?

  1. The gift is treated as income of the recipient in the year of receipt
  2. The gift becomes potentially exempt and falls out of the estate if the donor survives seven years Correct answer.
  3. The gift is a chargeable transfer immediately and always attracts tax at 40%
  4. The gift is exempt because it is made to a family member

Explanation

A gift to an individual is a potentially exempt transfer, which becomes exempt if the donor survives seven years after making it. If the donor dies within seven years, taper relief may reduce any tax due. Gifts to family members are not automatically exempt.

Question 39Taxation of Individuals

An individual makes a chargeable lifetime transfer into a discretionary trust. Which rate of inheritance tax generally applies at the time of the transfer?

  1. 10% on the value above the nil rate band
  2. 0% in all circumstances
  3. 40% on the whole value transferred
  4. 20% on the value above the available nil rate band Correct answer.

Explanation

A chargeable lifetime transfer is charged at 20% on the amount exceeding the available nil rate band, being half the death rate. The 40% rate applies on death, and taper relief may apply to additional tax. The rate is not 10% and the transfer is not always nil.

Question 40Taxation of Individuals

An individual receives a premium bond prize. How is the prize treated for income tax purposes?

  1. It is taxable as dividend income
  2. It is exempt from income tax Correct answer.
  3. It is taxable as savings income
  4. It is taxable as miscellaneous income

Explanation

Prizes from premium bonds are exempt from income tax. They are not treated as savings income, miscellaneous income or dividends. The exemption reflects the nature of the prize rather than an investment return.

Question 41Taxation of Companies and Corporate Groups

A UK-resident company prepares accounts to 31 December. For the year ended 31 December 2024, what is the standard main rate of corporation tax applied to its taxable profits assuming the company has no associated companies and profits above the upper limit?

  1. 19%
  2. 25% Correct answer.
  3. 20%
  4. 26%

Explanation

From 1 April 2023 the main rate of corporation tax for companies with profits above the upper limit is 25%. The 19% small profits rate applies only where profits fall at or below the lower limit. Marginal relief operates between the two limits.

Question 42Taxation of Companies and Corporate Groups

A company has taxable profits of £60,000 for a 12-month accounting period and no associated companies. Which rate of corporation tax applies to the whole of its profits?

  1. A blended rate of 22%
  2. The dividend ordinary rate
  3. The main rate of 25%
  4. The small profits rate of 19% Correct answer.

Explanation

Where augmented profits do not exceed the lower limit (£50,000 divided by the number of associated companies plus one), the small profits rate applies to all profits. Marginal relief is not needed because the profits fall wholly below the lower limit.

Question 43Taxation of Companies and Corporate Groups

What is the primary purpose of the quarterly instalment payment regime for large companies?

  1. To reduce the overall tax payable
  2. To replace the requirement to file a return
  3. To apply only to companies with tax losses
  4. To spread corporation tax payments across the year rather than paying it all after the year end Correct answer.

Explanation

Quarterly instalments require large companies to pay corporation tax in advance of the normal due date, spreading the liability across the accounting period. The regime does not change the amount of tax due, only the timing. It operates alongside, not instead of, the return filing obligation.

Question 44Taxation of Companies and Corporate Groups

A company makes a qualifying charitable donation of £10,000. How is this treated for corporation tax purposes?

  1. Deducted from total profits before calculating tax Correct answer.
  2. Added back as a disallowable expense and relieved separately
  3. Ignored entirely with no tax effect
  4. Deducted as a trading expense

Explanation

Qualifying charitable donations are not trading expenses but are deductible from total profits (after calculating the company's profits) in arriving at the amount chargeable to corporation tax. They are given as a charge on income rather than a trading deduction. This distinction matters where the donation relates to a trade.

Question 45Taxation of Companies and Corporate Groups

Which of the following best describes a company's trading losses for corporation tax purposes when carried forward against future profits of the same trade?

  1. They may be carried forward indefinitely and set against profits of the same trade Correct answer.
  2. They may only be carried forward for five years
  3. They may be surrendered to another group company as group relief in future periods
  4. They may be set against total profits of the loss-making period

Explanation

Trading losses carried forward under the normal rules are available indefinitely but restricted to profits of the same trade. They cannot be set against other income or gains unless a specific relief applies. Group relief does not operate for carried-forward losses in the same way as current-year losses.

Question 46Taxation of Companies and Corporate Groups

A company wishes to surrender a trading loss to another company in the same group under group relief. Which condition must be satisfied?

  1. The loss must arise in the surrendering company's final accounting period
  2. The claimant company must own at least 75% of the surrendering company's share capital
  3. Both companies must be resident in the same tax jurisdiction and share a group relationship for the whole or part of the accounting period Correct answer.
  4. The companies must be in the same trade

Explanation

Group relief requires a group relationship (broadly 75% common ownership) and both companies to be within the charge to corporation tax for the relevant period. The loss must be a qualifying loss of the surrendering company for that period. There is no requirement that the companies carry on the same trade.

Question 47Taxation of Companies and Corporate Groups

A group of companies includes a parent and two 100%-owned subsidiaries. How does the number of associated companies affect the corporation tax limits for the parent?

  1. The limits are divided by the number of associated companies plus one Correct answer.
  2. The limits are reduced by a fixed £10,000 per associate
  3. The limits are unaffected by associated companies
  4. The limits are multiplied by the number of associated companies

Explanation

The lower and upper profit limits are divided by the number of associated companies plus one (the company itself). This ensures the small profits rate and marginal relief are shared fairly across connected companies. Associated companies generally include those under common control.

Question 48Taxation of Companies and Corporate Groups

A company with taxable profits of £250,000 has augmented profits of £300,000. What is the relevance of the augmented profits figure?

  1. It replaces taxable profits for all purposes
  2. It is the figure on which corporation tax is directly charged
  3. It is used only to calculate the dividend rate
  4. It determines whether the company is a large company for quarterly instalment purposes Correct answer.

Explanation

Augmented profits (taxable profits plus exempt distributions from non-group companies) are used to test the quarterly instalment thresholds and certain rate limits. Corporation tax is charged on taxable profits, not on augmented profits. The distinction is important for determining payment obligations.

Question 49Taxation of Companies and Corporate Groups

How are capital gains realised by a company taxed?

  1. At the rate applicable to chargeable gains for individuals
  2. At a flat rate of 10%
  3. As part of the company's profits chargeable to corporation tax at the applicable corporation tax rate Correct answer.
  4. Exempt from tax for all companies

Explanation

Companies do not pay capital gains tax; instead chargeable gains are included in the company's profits chargeable to corporation tax. They are taxed at the corporation tax rate applicable to the company. Indexation allowance may apply to reduce the gain.

Question 50Taxation of Companies and Corporate Groups

What is the effect of the substantial shareholding exemption (SSE) for companies?

  1. It exempts gains on the disposal of shares in a qualifying subsidiary from corporation tax Correct answer.
  2. It reduces the corporation tax rate for holding companies
  3. It exempts all trading income from tax
  4. It defers tax on all capital disposals

Explanation

The SSE exempts gains (and generally disregards losses) on disposals of shares in qualifying subsidiaries where the substantial shareholding conditions are met. It supports group restructuring by removing a tax charge on qualifying share disposals. The conditions include holding a substantial shareholding for a minimum period.