ACCA Taxation (F6) Practice Exam

Which assets qualify for business asset disposal relief?

1. Assets owned for more than 2 years

2. Assets owned for less than 2 years

3. Only residential property owned for more than 2 years

4. Assets owned by a partnership

The correct answer is: Assets owned for more than 2 years

Business Asset Disposal Relief (formerly known as Entrepreneurs' Relief) is a provision under UK tax law that allows individuals to pay a reduced rate of Capital Gains Tax (CGT) on the sale of certain qualifying business assets. In order to qualify for this relief, assets must typically be owned for at least two years. This rule is a key criterion for the relief, as it encourages long-term investment in qualifying business assets. The correct answer reflects this requirement. When assets have been owned for more than two years, they meet the eligibility criteria established by HM Revenue & Customs (HMRC) for Business Asset Disposal Relief. This means that the disposal of these assets can benefit from lower CGT rates, which is often set at 10% for qualifying gains, significantly reducing the tax burden on the seller. In contrast, assets owned for less than two years do not qualify for this relief, as they fail to meet the minimum ownership period required. Residential properties, while potentially eligible for some other forms of relief, do not qualify under the same terms as business assets unless they are directly related to the business. Partnerships can also have ownership structures that may complicate qualification depending on the situation, but simply being owned by a partnership does not inherently grant them Business