ACCA Taxation (F6) Practice Exam

What happens if a type of gain is not covered by BADR when calculating taxable gains?

1. The gain is fully taxable

2. The gain can be deducted entirely

3. It counts as a loss

4. It is ignored

The correct answer is: The gain is fully taxable

When a type of gain is not covered by Business Asset Disposal Relief (BADR) when calculating taxable gains, it becomes fully taxable. BADR provides certain tax advantages, including reduced rates of Capital Gains Tax (CGT) on qualifying gains from the disposal of business assets. However, if a gain does not meet the specific criteria required for BADR, then it will not benefit from these lower rates. Instead, it will be treated as a standard taxable gain subject to the normal rates of capital gains tax that apply to individuals or businesses, depending on their circumstances. Therefore, the entire amount of that gain will be included in the taxable profits for the tax year in which the disposal occurred, and it will be taxed accordingly. This contrasts with the other options, which either imply a deduction or loss that does not align with the treatment of non-BADR gains.