ACCA Taxation (F6) Practice Exam

Who is eligible for investors relief?

1. Investors in listed companies only

2. Internal employees of the company

3. External investors in unlisted companies

4. All shareholders regardless of company status

The correct answer is: External investors in unlisted companies

Investors' relief is a specific tax relief available for individuals who invest in certain types of unlisted trading companies. This relief is aimed at encouraging investment in smaller, unlisted businesses, as it provides a capital gains tax (CGT) benefit when they dispose of their shares in these qualifying companies. The key aspect of investors' relief is that it is designed specifically for external investors who are looking to support unlisted companies. The relief is not applicable to investments in listed companies or to internal employees of a company who may receive share options or shares as part of their employment. Internal employees typically benefit from different tax treatments and incentives compared to external investors. While all shareholders might hold shares in a company, investors' relief is limited to a specific situation focused on external investors who contribute to unlisted trading companies. This targeted approach helps stimulate growth in smaller, potentially high-risk enterprises that can benefit from new capital. Thus, the option identifying external investors in unlisted companies as the eligible participants is correct because it encapsulates the precise criteria established for investors' relief.