Skip to content

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

A company buys the entire share capital of an unquoted UK company for £400,000 by stock transfer form. The company asks about the tax treatment of the stamp duty it pays. Which statement is correct?

Stamp duty is £2,000, being 0.5% of £400,000. It is an incidental cost of acquiring the shares, so it forms part of the base cost for computing a later chargeable gain. It is capital in nature and cannot be deducted against trading profits.

  1. AStamp duty is £2,000 and is added to the cost of the shares for chargeable gains purposesCorrect
  2. BStamp duty is £2,000 and is deducted as a trading expense in computing taxable profits
  3. CStamp duty is £4,000 and is added to the cost of the shares for chargeable gains purposes
  4. DStamp duty is £2,000 and is not allowable for any tax purpose

Explanation

Stamp duty is 0.5% × £400,000 = £2,000. It is an incidental cost of acquisition, so it is added to the base cost for a later chargeable gain. It is capital, so not deductible against trading profits. £4,000 uses 1%.

Did you get it right without looking?

One question tells you little. A timed set on Taxes applicable to a given situation or course of action and their impact shows your real accuracy, how long you take and where you lose marks.

Practise Taxes applicable to a given situation or course of action and their impactFree diagnostic mock

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