ACCA Advanced Taxation (ATX) Practice Exam

Which of the following accurately describes taxable benefits?

1. They are always cash items

2. They can be both cash and non-cash items

3. They are strictly non-cash items

4. They consist only of bonuses

The correct answer is: They are strictly non-cash items

Taxable benefits are a broad category that includes various forms of compensation provided to employees, and they can take different forms. The correct answer reflects this understanding by recognizing that taxable benefits can include both cash and non-cash items. Taxable benefits are not limited to cash items; they can encompass a wide range of non-cash perks such as company cars, health insurance, or stock options. This diversity in the types of benefits highlights why the assertion that they are strictly non-cash items is inaccurate. Additionally, defining taxable benefits exclusively as bonuses would overlook other significant forms of compensation that are subject to taxation, such as allowances and reimbursements. In essence, the correct answer emphasizes the comprehensive nature of taxable benefits, affirming that they can be either cash or non-cash items. This knowledge is crucial when considering the overall compensation structure and tax implications for both employers and employees.