ACCA Taxation (F6) Practice Exam

What qualifies for investors relief with respect to share ownership?

1. Shares held for 1 year

2. Shares held for at least 3 years after 6 April 2016

3. Only shares issued prior to 2016

4. Any shares regardless of holding period

The correct answer is: Shares held for at least 3 years after 6 April 2016

Investors’ relief is designed to encourage investment in unlisted trading companies by providing a capital gains tax (CGT) relief when shareholders dispose of their shares. To qualify for this relief, specific conditions related to the ownership period and the nature of the shares must be met. The correct answer aligns with the requirement that shares must be held for at least three years after the introduction of the relief, which began on 6 April 2016. This means that for a shareholder to benefit from the relief, they must have retained their shares in the qualifying company for a minimum duration to demonstrate a genuine long-term investment. This extended holding period is intended to promote stability in the funding of small businesses that are not publicly traded. In contrast, the other options do not meet the criteria set out for the Investors’ relief: - Holding shares for only one year does not satisfy the required minimum duration for relief eligibility. - Shares issued prior to 2016 do not automatically qualify, as the relief specifically applies to shares held after the introduction of the legislation on 6 April 2016. - Allowing any shares regardless of the holding period contradicts the fundamental requirement that investors must maintain their investment for a designated time frame to qualify for the relief. Therefore,