ACCA Advanced Taxation (ATX) Practice Exam

What implication does a failure to report a chargeable gain have for the client?

1. The client must notify HMRC and pay any outstanding tax

2. The client is not responsible for any tax penalties

3. The client cannot claim any tax relief

4. The client is eligible for a grace period

The correct answer is: The client must notify HMRC and pay any outstanding tax

When a client fails to report a chargeable gain, the implication is that they are required to notify HM Revenue and Customs (HMRC) about the oversight and pay any outstanding tax due on that gain. In the context of tax law, chargeable gains arise when an asset is sold for more than its allowable cost, and the tax on this gain must be reported and remitted to HMRC within the specified deadlines. If this gain is not reported, the client could be liable for additional tax that remains unpaid. To rectify the situation, the client must voluntarily inform HMRC about the unreported chargeable gain to ensure compliance with tax obligations. This also serves to mitigate any potential penalties that may arise from non-disclosure if the situation were to be discovered by HMRC. The other options suggest various scenarios about responsibilities and eligibility for reliefs or penalties that do not align with the legal obligations a client faces when failing to report a chargeable gain. Thus, the correct response focuses on the necessity for the client to notify HMRC and settle any tax liabilities to address the failure properly.