ACCA Advanced Taxation (ATX) Practice Exam

Is it true that capital losses for individuals can offset against chargeable gains?

1. True

2. False

3. Only for higher-rate taxpayers

4. Only through specific allowances

The correct answer is: True

Capital losses for individuals can indeed offset against chargeable gains. This is a fundamental principle of capital gains tax legislation, allowing taxpayers to reduce their overall tax liability by using their losses to diminish their taxable gains. When an individual realizes a capital gain, they are typically liable to pay tax on that gain. However, if they have incurred capital losses in the same tax year or carried forward losses from previous years, they can apply those losses to offset their gains. This offsetting mechanism promotes fairness in the tax system, as it acknowledges that not all investment activities result in profit. It also serves to encourage investment by providing some relief for losses. Individuals should be aware of the rules regarding the timing and reporting of such losses for them to effectively utilize this benefit. The other answer options address misconceptions regarding who can benefit from this rule (such as suggesting limitations based on taxpayer status or specific allowances), but the core principle remains that capital losses can indeed be used by all individuals to offset chargeable gains, making it a straightforward evaluation in the context of capital gains tax.