ACCA Advanced Taxation (ATX) Practice Exam

Which of the following is included in the pro forma calculation for deriving taxable gains?

1. Net chargeable gains

2. Tax reliefs

3. Overseas income

4. Personal allowances

The correct answer is: Net chargeable gains

The correct choice pertains to net chargeable gains, as these are directly relevant to calculating taxable gains for individuals or entities. When determining taxable gains, specifically in regard to capital gains tax, the net chargeable gains represent the profits made from the sale or disposal of chargeable assets after deducting any allowable losses and costs associated with the acquisition or disposal of those assets. Net chargeable gains are essential because they provide the foundation for understanding how much gain can be taxed. They form part of the taxable income of an individual or corporate taxpayer, influencing the total amount of tax payable. On the other hand, tax reliefs, overseas income, and personal allowances are not included in the direct calculation of taxable gains. Tax reliefs may reduce the amount of tax payable but don't directly impact the calculation of gains themselves. Overseas income, while it may affect overall income tax calculations, does not directly relate to the computation of capital gains. Personal allowances can reduce overall taxable income but are not factored into the calculation of net chargeable gains specifically. Thus, the focus on net chargeable gains as part of taxable gains is clear and important for accurate tax assessments.