ACCA Taxation (F6) Practice Exam

What are chargeable gains?

1. Net profits from all asset sales

2. Gains after deducting the annual exempt amount

3. Gains before deduction of the annual exempt amount and losses brought forward

4. Losses carried forward from previous years

The correct answer is: Gains before deduction of the annual exempt amount and losses brought forward

Chargeable gains refer specifically to the profits realized from the disposal of chargeable assets, calculated before accounting for specific deductions such as the annual exempt amount or any capital losses that may be carried forward. Therefore, to determine chargeable gains, one identifies all gains from the sale of assets and considers any losses from previous years that can be offset against current gains. The annual exempt amount is applied after calculating the gross gains to determine the taxable portion, but it does not factor into the initial calculation of chargeable gains. This understanding is crucial in taxation as it delineates what is considered profit subject to tax versus what may be exempt. Since the other options reference different contexts or misunderstand the timing of deductions, they do not describe chargeable gains accurately—whether including net profits in total, applying exemptions prematurely, or focusing solely on losses. By clarifying the definition and calculation process, it establishes why the understanding of chargeable gains is important in the context of capital gains taxation.