ACCA Advanced Taxation (ATX) Practice Exam

Which of the following bases allows tax on all overseas income to be reported, regardless of whether brought to the UK?

1. Remittance basis

2. Arising basis

3. Worldwide basis

4. Non-resident basis

The correct answer is: Arising basis

The correct answer is the arising basis, which is significant because it mandates that individuals are taxed on their worldwide income as it arises, regardless of whether that income is brought into the UK. This means that all income, including overseas income, is subject to UK tax in the year it is earned, presenting a comprehensive taxation approach that includes foreign earnings without requiring actual remittance. In contrast, the remittance basis only taxes individuals on their UK income and any foreign income that they bring into the UK. The worldwide basis, while it might sound similar, isn't a term typically used in UK tax legislation in this sense. It essentially overlaps with the arising basis, but the terminology might cause confusion without precise context in tax law. Finally, the non-resident basis applies specifically to individuals who are not considered tax residents in the UK, meaning their UK tax obligations differ significantly and wouldn't encompass tax on overseas income in the same manner. Thus, the arising basis clearly captures the essence of worldwide taxation of income as it arises, making it the correct answer in this scenario.