ACCA Advanced Taxation (ATX) Practice Exam

If gift relief is not claimed, what relief may be available on a remaining chargeable gain?

1. Incorporation relief

2. Exemption relief

3. BADR

4. PRR

The correct answer is: BADR

When gift relief is not claimed on a transfer of assets, the available relief on any remaining chargeable gain can indeed include Business Asset Disposal Relief (BADR). This relief is particularly beneficial for individuals disposing of their business assets and is aimed at reducing the tax burden on gains from the sale of qualifying business assets. BADR allows individuals to pay a reduced rate of Capital Gains Tax (CGT) on qualifying gains, which, as of the current regulations, can be as low as 10%. This significantly alleviates the tax impact on profits realized from the disposal of business assets, especially for small businesses and sole traders. It’s important to note that while other types of reliefs exist, such as incorporation relief, exemption relief, and private residence relief (PRR), they do not apply to the scenario where gift relief is not claimed. Incorporation relief relates to the transfer of a business into a company structure, exemption relief often pertains to specific types of gains or assets that are exempt from taxation, and PRR is relevant to gains made on the sale of a taxpayer's only or main residence. Each relief has distinct qualifying criteria and contexts, making BADR the appropriate choice in the situation described.