ACCA Advanced Taxation (ATX) Practice Exam

What additional relief is available for small and medium-sized enterprises (SMEs)?

1. Extra 50% deduction against trading income

2. Extra 86% deduction against trading income

3. Extra 100% deduction against trading income

4. No additional relief available

The correct answer is: Extra 86% deduction against trading income

The additional relief available for small and medium-sized enterprises (SMEs) is an extra 130% deduction against qualifying research and development (R&D) expenditure under the R&D tax credits regime. While this option does not appear directly in your choices, understanding the context of available reliefs is important. In the context you're asking about, the most suitable reference would be the extra 130% deduction available to SMEs on their R&D expenditure, which encourages innovation within smaller businesses by effectively reducing their taxable profits through enhanced deductions. This relief improves cash flow for SMEs, making it more viable for them to invest in innovative projects. The confusion may arise from the specific percentages cited in the other options, which do not accurately reflect the relief schemes available for SMEs. The significance of the extra deduction can thus be contextualized within the framework of incentivizing R&D activity, underscoring the support provided to encourage growth and development in small enterprises.