Advanced Taxation (UK) · Taxes applicable to a given situation or course of action and their impact

Identifying Relevant Taxes for a Given Situation in ATX-UK

Updated 11 October 2026 · Fact-checked

Identifying relevant taxes means reading a scenario and listing every UK tax that can arise, for each person involved. Work through the parties, then the transaction, then each tax in turn: income tax, NIC, CGT, corporation tax, IHT, VAT and stamp taxes. Then quantify only what the requirement asks.

Understand Identifying Relevant Taxes for a Given Situation

ATX-UK scenarios rarely say "calculate the CGT". They describe a situation: a client sells a business, gifts shares, buys a property or pays a bonus. You must decide which taxes are triggered and who pays them.

The key idea is that one transaction can trigger several taxes, each on a different person. Selling a building might give a chargeable gain to the seller, VAT on the sale if the option to tax applies, and SDLT for the buyer. A bonus to a director gives income tax and employee NIC for the director, and employer NIC for the company, which also gets a corporation tax deduction.

Start with who is involved: individual, company, trust, partnership. This decides the family of taxes. Individuals pay income tax, CGT and IHT. Companies pay corporation tax, which includes chargeable gains. Trusts have their own rules. Then ask what happens: income received, an asset disposed of, a gift, a purchase, a supply of goods or services. Finally ask when and where, because residence and timing affect scope.

The exam gives you the rates and allowances for 2025/26 and the financial year to 31 March 2026, and tells you to assume they continue unless told otherwise. Finance Act 2025 is examined for sessions from June 2026 to March 2027 and in June 2027. Your job is to know which table applies to which tax, so you pick the right figure quickly. Always read the requirement: it may ask only for the tax implications, not a full computation.

Key rules to remember

Income tax rates (non-dividend): Basic £1 – £37,700: 20%; Higher £37,701 – £125,140: 40%; Additional over £125,140: 45%; Dividend rates are 8.75%, 33.75% and 39.35%. Dividend nil rate band is £500.
Corporation tax: Small profits rate 19% (up to £50,000); main rate 25% (over £250,000); marginal relief = (£250,000 – augmented profits) × 3/200 × taxable total profits ÷ augmented profits; Limits are for a 12-month period and are reduced for short periods or associated companies.
Capital gains tax: Lower rate 18%, higher rate 24%; annual exempt amount £3,000; BADR and investors' relief 14% on lifetime limit of £1,000,000; Rates depend on how much of the basic rate band is unused.
Inheritance tax: Nil rate band £325,000; residence nil rate band £175,000; lifetime rate 20%; death rate 40%; Taper relief: 20%, 40%, 60%, 80% for 3-4, 4-5, 5-6, 6-7 years before death.
VAT: Standard rate 20%; registration limit £90,000; deregistration limit £88,000; Late payment penalty: none up to 15 days, 3% for 16 to 30 days, 6% plus daily penalty at 10% a year over 30 days.
Stamp taxes: SDLT non-residential: 0% to £150,000, 2% on £150,001 – £250,000, 5% above £250,000. Stamp duty on shares: 0.5%; SDLT is on slices of the price. Stamp duty is paid by the buyer of shares.
Interest rates (assumed): Official rate 3.75%; underpaid tax 8.50%; overpaid tax 3.50%; The official rate is used for beneficial loans and similar benefits.

How to solve Identifying Relevant Taxes for a Given Situation questions

Use the same sequence for any scenario. It stops you missing a tax and stops you writing about taxes that do not arise.

1Read the requirement first. Note whether you must identify, explain, calculate or recommend, and for whom.
2List every person and entity in the scenario: individuals, companies, trusts, partners. Note residence and any group links.
3Write down each transaction or event: sale, gift, purchase, payment, supply, death, incorporation.
4For each transaction and each person, test every tax: income tax, NIC, CGT, corporation tax, IHT, VAT, SDLT and stamp duty.
5Decide the person liable for each tax and the timing, such as the tax year, accounting period or date of transfer.
6Check for reliefs or exemptions that remove or reduce the tax, such as BADR, gift relief or exempt transfers.
7Calculate only what is asked, using the tax tables and showing all workings to the nearest £.
8Finish with a short conclusion that answers the requirement in the client's terms, including any cash flow or deadline point.

Quickest way: Person-by-transaction grid

When to use it: Use when time is short and the scenario has several parties or transactions.

Jot a small grid on your answer sheet: people down the side, transactions across the top.
In each box, write the tax initials that apply, such as IT, NIC, CGT, CT, IHT, VAT, SDLT.
Tick the boxes that match the requirement and ignore the rest.
Write your answer by person, using the grid as your plan, and put figures in only where the requirement asks.

Common mistakes in Identifying Relevant Taxes for a Given Situation

Naming only one tax per transaction.
You spot the obvious tax and stop.
Fix: Run through all seven tax families for every transaction and every party.
Charging the wrong person, such as taxing the company for the director's NIC.
You do not separate the individual from the company.
Fix: State the taxpayer beside each tax. Employee NIC and income tax fall on the employee, employer NIC on the company.
Applying CGT to a company or corporation tax to an individual's gain.
Mixing up the regimes.
Fix: Companies pay corporation tax on chargeable gains. Individuals pay CGT at 18% or 24%.
Using rates from memory instead of the tax tables.
You are under time pressure and trust recall.
Fix: Check the table for every rate and limit. The exam gives them, so use them.
Writing a full computation when only identification was asked.
You want to show everything you know.
Fix: Match the depth to the requirement. Extra workings earn no marks and cost time.
Ignoring reliefs and exemptions in the answer.
You focus on finding taxes, not reducing them.
Fix: After listing a tax, ask whether any relief, exemption or exempt transfer applies and say so.

Worked examples

Example 1

Priya, a UK-resident individual, owns all the shares in Kite Ltd, a trading company. She sells her shares to an unconnected buyer for £1,400,000 and gives her daughter a gift of £50,000 cash the same month. Identify the taxes arising and who pays them.

Show the solution

People: Priya (individual), her daughter, the buyer. Kite Ltd is not itself party to the sale.
Share sale: a disposal of a chargeable asset by an individual, so CGT arises on Priya. Gains on qualifying shares may qualify for business asset disposal relief, giving the 14% rate up to the £1,000,000 lifetime limit; the excess is taxed at 18% or 24%.
Stamp duty: 0.5% on the share price is paid by the buyer, not Priya.
Cash gift: cash is not a chargeable asset, so no CGT. For IHT it is a potentially exempt transfer to an individual, and it is only taxed if Priya dies within seven years. Annual exemptions may reduce the value.
Income tax, NIC, VAT and corporation tax: none arise for Priya on the share sale. VAT does not apply to a sale of shares.

Answer: Priya pays CGT on the share gain, possibly at 14% on up to £1,000,000 if BADR conditions are met. The buyer pays stamp duty at 0.5%. The gift is a PET for IHT and is taxed only if Priya dies within seven years. No income tax, NIC, VAT or corporation tax arises.

Example 2

Delta Ltd pays its sole employee-director, Sam, a bonus of £10,000. It also buys a non-residential freehold building for £400,000 from a seller who has not opted to tax. Identify the taxes arising, and calculate the SDLT.

Show the solution

Bonus: Sam is taxed to income tax on the £10,000 as earnings, and Class 1 employee NIC arises. Delta Ltd pays employer Class 1 NIC. The bonus and employer NIC are deductible in Delta's corporation tax computation.
Building purchase: Delta Ltd, the buyer, pays SDLT. No VAT arises because the seller has not opted to tax.
SDLT on the first £150,000 at 0%: £0.
SDLT on the next £100,000 (£150,001 to £250,000) at 2%: £2,000.
SDLT on the remaining £150,000 (£250,001 to £400,000) at 5%: £7,500.
Total SDLT = £0 + £2,000 + £7,500 = £9,500.

Answer: Sam bears income tax and employee NIC on the bonus; Delta bears employer NIC and gets a corporation tax deduction. Delta pays SDLT of £9,500 on the building and no VAT arises.

Exam tips

Read the requirement before the scenario and underline who you are advising. Mark allocation follows the requirement.
Use the tax tables to pick the rate or limit, and quote the figure you use so markers can follow your workings.
Assume 2025/26 rates continue unless told otherwise, and show workings to the nearest £, with apportionments to the nearest month.
Professional skills marks reward a clear structure and an answer that fits the client, so use short headed paragraphs by tax or by person.
If the scenario gives a fact that seems unneeded, such as residence, a group link or an option to tax, it usually decides whether a tax arises.

Practice questions from Taxes applicable to a given situation or course of action and their impact

Identifying Relevant Taxes for a Given Situation: frequently asked questions

Which taxes do I need to know for a transaction in ATX-UK?

Income tax, NIC, CGT, corporation tax, IHT, VAT and stamp taxes (SDLT on non-residential property and stamp duty on shares). You test each one against every person and transaction in the scenario. Only the taxes that arise belong in your answer.

Does ATX-UK give me the tax rates in the exam?

Yes. The exam reproduces the tax rates and allowances and the supplementary instructions. For June 2026 to March 2027 and June 2027 sittings these are based on Finance Act 2025, and you assume 2025/26 rates continue unless told otherwise.

Do I always need to calculate the tax?

No. Some requirements ask you only to explain or identify the taxes. Calculate only when the requirement asks for figures, and show workings when you do.

How do I avoid missing a tax in a long Section A case?

Use a grid of people against transactions and tick the taxes for each box. This takes a minute and gives you a plan for the answer. It also shows markers a logical approach.