ACCA Taxation (F6) Practice Exam

Are gilts and corporate bonds subject to capital gains tax upon disposal?

1. Yes, they are taxable

2. They are partially exempt

3. No, they are exempt

4. Only corporate bonds are taxable

The correct answer is: No, they are exempt

Gilts, which are government securities, are generally exempt from capital gains tax upon disposal. This exemption is designed to encourage investment in government debt and stabilizes the economy by making it more attractive for investors to hold these types of securities. In contrast, corporate bonds are typically not exempt and can be subject to capital gains tax, meaning that gains from the sale of corporate bonds must be reported and can be taxed. Understanding this distinction is critical for anyone studying taxation since it illustrates the varying treatment of different types of financial instruments under tax law. The notion that gilts enjoy this tax exemption while corporate bonds do not underlines the government's intention to maintain a robust market for its securities. Therefore, the assertion that gilts are exempt from capital gains tax upon disposal is accurate.