ACCA Advanced Taxation (ATX) Practice Exam

Are sports and recreational facilities considered an exempt employment benefit?

1. Yes, they are exempt

2. No, they are taxable

3. Only during work hours

4. Depends on the employee's contract

The correct answer is: Yes, they are exempt

Sports and recreational facilities can indeed be considered an exempt employment benefit under specific conditions. When employers provide such facilities to their employees, they are often intended as part of a broader program to promote employee health, wellness, and morale, which can qualify for certain exemptions under tax law. One key factor that supports the exemption is that these facilities are usually for the employees' use and do not provide a direct financial benefit to the employer beyond improving the working environment. Additionally, tax legislation often includes exemptions for benefits that are provided primarily for recreational or social purposes if they do not provide significant value outside of the stated intent. In this case, the correct answer emphasizes the general principle that these benefits, when offered by employers under the right circumstances, may not be subject to taxation, reinforcing the idea that the focus is on promoting employee well-being rather than generating taxable income. Other options hint at varying conditions that might affect the taxability, but the overarching view in many tax jurisdictions is that sports and recreational facilities typically qualify for exemption when they meet the criteria set forth in tax regulations.