ACCA Advanced Taxation (ATX) Practice Exam

Which of the following factors should be considered when advising a client on tax-advantaged schemes?

1. The company’s market share

2. Does the company want to reward all employees or just key employees?

3. Current stock market performance

4. The company's customer satisfaction ratings

The correct answer is: Does the company want to reward all employees or just key employees?

When advising a client on tax-advantaged schemes, considering whether the company wants to reward all employees or just key employees is crucial. This choice affects the structure and effectiveness of the tax-advantaged scheme. For example, if the intention is to create broad-based incentives to enhance morale and engagement among all employees, the design of the scheme may differ from that of a program aimed specifically at key employees for retention or performance purposes. Tax-advantaged schemes can include employee stock ownership plans or profit-sharing schemes, which have implications for tax liabilities and benefits not just for the company, but for the employees as well. The approach taken could depend on the company culture and objectives, which influence the effectiveness of these schemes in achieving the desired motivational or financial outcomes. Other factors, while relevant to the broader business strategy, are secondary to the immediate goal of designing a tax-advantaged scheme that meets the company's specific needs regarding employee recognition and reward. Market share, stock performance, and customer satisfaction ratings provide context about the company's overall performance and health but do not directly inform the nuances of tax treatment and employee reward mechanics as the engagement of employees in the scheme does.