ACCA Advanced Taxation (ATX) Practice Exam

Is the duration of asset usage in a trading business relevant for determining the availability of Business Asset Disposal Relief (BADR)?

1. Yes, the asset must be used for at least two years

2. No, the business must have existed for two years prior to cessation

3. Yes, it depends on the type of asset

4. No, it has no relevance in this context

The correct answer is: No, the business must have existed for two years prior to cessation

The availability of Business Asset Disposal Relief (BADR) is fundamentally influenced by the existence and activities of the business rather than the individual asset's duration of use. For BADR to apply, it is necessary that the business has been operational for a minimum of two years prior to the disposal of qualifying business assets. This requirement ensures that the relief is aimed at long-term businesses rather than short-term operations, providing a measure of stability and commitment to sustaining a trading business. While options addressing asset usage and specific asset types may seem relevant, they do not align with the primary condition for BADR applicability. Instead, the critical factor is the duration of the business's existence, which underlines the policy intent of supporting ongoing businesses and their successful transitions rather than the longevity of specific assets. This focus on the business as a whole rather than individual assets is what makes the correct answer relevant in the context of BADR.