ACCA Advanced Taxation (ATX) Practice Exam

How long must an individual be absent from the UK to qualify as a temporary non-resident for CGT?

1. Less than two years

2. Less than three years

3. Less than five years

4. Less than six years

The correct answer is: Less than five years

To qualify as a temporary non-resident for capital gains tax (CGT) purposes, an individual must be absent from the UK for a certain duration. Specifically, the correct timeframe is less than five years. This classification as a temporary non-resident is significant because it determines how CGT is applied to any gains made during the period of absence. If an individual is absent for fewer than five years, they retain temporary non-residence status, meaning that any capital gains arising during this period may not be subject to UK CGT, as long as they haven't established residency in another country for tax purposes. In contrast, an absence longer than five years typically results in the individual losing their temporary non-resident status, which can lead to different tax implications upon their return to the UK or disposal of assets. Understanding this distinction is crucial for tax planning and recognizing how periods of absence impact an individual's tax residency and capital gains tax obligations.