ACCA Advanced Taxation (ATX) Practice Exam

What happens to a held-over gain if an individual who has made a joint claim for gift holdover relief emigrates from the UK?

1. The gain is disregarded entirely

2. The gain crystallises and is chargeable on the day before emigration

3. The gain becomes subject to double taxation rules

4. The gain remains deferred until the individual returns to the UK

The correct answer is: The gain crystallises and is chargeable on the day before emigration

When an individual who has made a joint claim for gift holdover relief emigrates from the UK, the held-over gain crystallises and becomes chargeable on the day before emigration. This means that the gain, which was initially deferred while the individual remained a UK taxpayer, will now need to be accounted for in terms of tax liability. This mechanism occurs because the individual is effectively leaving the UK tax jurisdiction, and thus, any gains that were previously held over due to the gift holdover relief need to be realized at that point. The crystallisation ensures that the proper tax implications of the gain are addressed before the individual ceases to be a taxpayer under UK law. The other options do not accurately describe the treatment of held-over gains in the context of emigration from the UK. Disregarding the gain entirely is not viable since the gain must still be accounted for before an individual's departure. Additionally, while there may be issues related to double taxation if the individual becomes liable in another jurisdiction, this is not a standard aspect of the gain's treatment upon emigration. Lastly, the idea that the gain remains deferred until the individual returns to the UK does not align with the fundamental principles of taxation in relation to emigration, as it would