ExpertMedium2 marksMultiple Choice
ACCA · Question 05 · Chargeable gains for individuals
Section A
Julian operates a manufacturing business as a sole trader. He decides to scale down his operations and sells 40% of his factory machinery. He continues to run the business at a reduced capacity. Does this disposal qualify for Business Asset Disposal Relief (BADR)?
Section A
Julian operates a manufacturing business as a sole trader. He decides to scale down his operations and sells 40% of his factory machinery. He continues to run the business at a reduced capacity. Does this disposal qualify for Business Asset Disposal Relief (BADR)?
Answer options:
A.
Yes, because the machinery was used in a qualifying trade for at least 2 years.
B.
Yes, because he sold a substantial portion (40%) of his operating capacity.
C.
No, because BADR only applies to the disposal of shares in a personal company.
D.
No, because it is merely a disposal of business assets, not a disposal of the whole or part of a business.
How to approach this question
Distinguish between the disposal of business assets and the disposal of a part of a business. BADR requires the latter.
Full Answer
D.No, because it is merely a disposal of business assets, not a disposal of the whole or part of a business.✓ Correct
For a sole trader, Business Asset Disposal Relief (BADR) is available on the disposal of the whole or part of a business. The disposal of individual business assets without disposing of the business (or a distinct part of it) does not qualify for BADR. Since Julian is continuing the same trade, he has merely sold assets.
Common mistakes
Assuming that selling a large percentage of assets equates to selling 'part of a business'.
Practice the full ACCA TX — Taxation Practice Exam 4
32 questions · hints · full answers · grading
More questions from this exam
Q01Section A
HM Revenue & Customs (HMRC) has the power to raise a discovery assessment if they disc...EasyQ02Section A
Marcus owns a coastal cottage that qualifies as a Furnished Holiday Letting (FHL). Dur...MediumQ03Section A
An environmental NGO provides its director with a zero-emission electric company car. ...MediumQ04Section A
Helena sold two assets during the tax year: an antique clock for £7,500 (cost £3,000) ...HardQ06Section A
Five years ago, Clara made a Potentially Exempt Transfer (PET) of shares in an unquote...Medium