ACCA Advanced Taxation (ATX) Practice Exam

How is the amount qualifying for Business Property Relief calculated when there are excepted assets?

1. By the total value of the business assets only

2. Transfer of value × (Value of total assets - Excepted assets)/Value of total assets

3. Transfer of value × (Excepted assets/Total value)

4. Transfer of value × (Total assets/Excepted assets)

The correct answer is: Transfer of value × (Value of total assets - Excepted assets)/Value of total assets

The rationale for the correct choice lies in the nature of Business Property Relief (BPR) and how it applies when certain assets do not qualify as business assets, known as excepted assets. When calculating the amount qualifying for BPR, it is essential to identify which assets in the total portfolio are eligible and which are excluded. Excepted assets refer to those that do not contribute to the qualifying conditions for BPR, such as cash held, shares in non-qualifying companies, or personal use assets. The formula outlined in the correct answer indicates that the calculation starts with the transfer of value, which is crucial as it represents the gift or transfer amount involving the business. To arrive at the qualifying amount for BPR, the value of the eligible business assets is determined by subtracting the value of excepted assets from total assets, dividing this adjusted amount by the total assets. This gives the proportionate share of the business assets that qualify for relief, ensuring that the calculation accurately reflects only the values that truly derive from the qualifying business assets. Thus, the formula correctly accounts for the proportion of qualifying assets in comparison to total assets, enabling a fair and lawful application of BPR when excepted assets exist. This consideration is vital for accurately calculating