ACCA Advanced Taxation (ATX) Practice Exam

What are the conditions for deemed occupation rules regarding property?

1. The property is rented during that period

2. The property is owned but not occupied

3. The property is PR during that period

4. The owner must live in the property full-time

The correct answer is: The property is PR during that period

The deemed occupation rules regarding property primarily relate to the circumstances under which an individual can consider a property their principal residence for tax purposes, even if they are not physically living in it. In many tax jurisdictions, these rules aim to prevent individuals from avoiding capital gains tax by not using a property as their main home while still benefiting from its appreciation in value. The correct answer involving principal residence (PR) is significant because being classified as a PR has specific tax implications. If a property qualifies as a principal residence, it often benefits from reliefs and exemptions from capital gains tax when the owner decides to sell it. This means that even if the owner is not occupying the property at the moment, as long as it is deemed their principal residence for the period in question, they can still claim tax reliefs. While the other options present relevant scenarios regarding property ownership and usage, they do not fulfill the same criteria for tax relief associated with the deemed occupation classification as a principal residence does. For instance, merely owning property or having it rented out does not change its status regarding tax implications unless it meets the criteria of being the owner's principal residence. This distinction is crucial in tax legislation, as it affects how gains from property are taxed.