ACCA Advanced Taxation (ATX) Practice Exam

Is it true that a charity or political party must include disposed property from the last five years as 'related property'?

1. True, it will always be considered related property

2. False, it depends on the current value of the asset

3. True, but only if the asset was worth more than £1,000

4. False, it is excluded regardless of time

The correct answer is: True, it will always be considered related property

A charity or political party must indeed consider disposed property from the last five years as 'related property'. This classification is significant because it affects how the charity or political party is treated for tax purposes. When disposed property is recognized as 'related property,' any gains or losses from the disposal can significantly impact the tax obligations of the entity, especially in relation to capital gains tax reliefs. The reasoning behind this requirement is rooted in preventing tax avoidance strategies that could arise from frequent trading of assets. By including disposed assets within a defined period, tax authorities can ensure that all relevant transactions are transparent and accounted for, fostering fairness and compliance in charitable and political activities. The other options provide distinctions that do not align with the fundamental principles governing 'related property' as defined in tax regulation, emphasizing the necessity for clarity in understanding the five-year disposal rule.