ACCA Advanced Taxation (ATX) Practice Exam

Under what condition is a chargeable gain not crystallised for a donee who emigrates?

1. If they are employed as a full-time employee abroad

2. If they do not dispose of the asset while abroad

3. If they return to the UK within two years

4. If they were born in the UK

The correct answer is: If they are employed as a full-time employee abroad

The correct answer relates to the specifics of how chargeable gains are treated under UK tax law, particularly in the context of emigration and the disposal of assets. When a donee emigrates, a chargeable gain on an asset is not crystallised if they do not dispose of that asset while they are abroad. This is because UK tax law operates on a principle that gains are only recognised upon disposal. If the donee holds onto the asset and does not sell or otherwise dispose of it, then no gain is considered to have been realised, regardless of their employment status or time spent abroad. In this context, while being employed full-time abroad can suggest a change in residency and may affect tax obligations, it does not automatically prevent a chargeable gain from being crystallised. The critical factor is the actual act of disposal of the asset—if they continue to own it, they have not realised a gain. Furthermore, returning to the UK within two years could imply a possibility of the gain being crystallised if they were to dispose of the asset upon their return. The nationality or birthplace of the donee is also irrelevant to the crystallisation of chargeable gains; it's the actions related to the asset that determine tax implications. Therefore,