ACCA Advanced Taxation (ATX) Practice Exam

What is the maximum allowable deduction against employment income for 'partnership shares'?

1. £1,500

2. £1,800

3. £2,000

4. 10% of annual salary

The correct answer is: £1,800

In the context of allowable deductions against employment income for partnership shares, the correct answer is established by the limits set out in tax legislation regarding employee share incentive plans. Under the current tax rules, specific programs allow employees to deduct a certain amount when they receive shares as part of their compensation, aimed at encouraging participation in company performance and ownership. Typically, the limit for deductions related to partnership shares is set at £1,800. This figure is designed to provide individuals with a tangible benefit while also ensuring that tax relief is appropriately managed by the revenue authority. Deductions beyond this amount may not qualify for relief, as they would exceed the framework established by tax guidelines which aim for fair taxation and consistent application across different employment scenarios. Understanding the rationale behind this limit can help in grasping how tax relief for share schemes operates, reflecting both the incentivization of employee performance and the revenues' need to maintain effective regulatory measures. The other options do not align with the current statutory provisions on allowable deductions, making them incorrect within this tax framework.