ACCA ATX Capital Gains Tax: Complete Study Guide (2024/25)

If you are studying for ACCA ATX (Advanced Taxation — UK), you will already be familiar with CGT from your TX studies. At Strategic Professional level, the expectation shifts from calculation to planning. Examiners want to see you advise a client on the most tax-efficient way to structure a disposal, not just compute a gain. This guide covers the full CGT syllabus for ATX, with the detail and nuance the exam demands.

For an overview of the full ATX syllabus, visit our ACCA Advanced Taxation course page or the ATX study hub.

1. Why CGT Matters in ACCA ATX

CGT, income tax, and inheritance tax together form the core of the personal tax section of ATX. The exam is 3 hours 15 minutes, worth 100 marks, and is open book — you may use HMRC guidance and the tax rates and allowances provided. Historically, CGT questions have appeared in both the compulsory Section A question (worth up to 35 marks) and the optional Section B questions.

What makes CGT challenging at ATX level is not the computation itself but the interaction with other taxes and reliefs. A disposal of a business may trigger CGT on goodwill, income tax on a cessation period, and IHT implications if the client intends to gift assets. The ability to spot these interactions and advise accordingly is what separates a pass from a high mark.

2. CGT Computation Structure

Every CGT calculation starts from the same framework. Getting this right under exam pressure is essential.

Disposal Proceeds

Use actual proceeds for arm's-length transactions. For connected persons (spouses, civil partners, relatives, business partners) or gifts, the disposal is deemed to take place at market value, regardless of what was actually paid or received. This is one of the most frequently tested rules in ATX — see Section 9 below for more detail.

Less: Allowable Costs

Deduct the following:

• Acquisition cost — the original purchase price (or market value if gifted and holdover relief was claimed).

• Enhancement expenditure — capital expenditure that adds to or improves the asset, still reflected in its state at disposal. Routine repairs and maintenance are not allowable.

• Incidental costs of acquisition and disposal — legal fees, stamp duty, estate agents' fees, and similar transaction costs.

Annual Exempt Amount

For 2024/25, the annual exempt amount (AEA) is £3,000. This is deducted from net chargeable gains for the year. It cannot be carried forward if unused, and it cannot be transferred between spouses (though each individual has their own AEA — a key planning point).

CGT Rates (2024/25)

• Residential property: 18% (basic rate taxpayer) / 24% (higher or additional rate taxpayer)

• All other assets (including business assets): 10% (basic rate) / 20% (higher rate)

• BADR qualifying gains: 10% regardless of income tax band (subject to lifetime limit — see Section 4)

To determine the applicable rate, add the taxable gain to the individual's taxable income and assess how much of the basic rate band (£37,700 for 2024/25) remains. Gains using up remaining basic rate band are taxed at the lower rate; gains above that are taxed at the higher rate.

3. Principal Private Residence (PPR) Relief

PPR relief exempts the gain on disposal of an individual's only or main residence. This is one of the most nuanced areas of ATX CGT and consistently appears in planning questions.

Basic PPR Calculation

The exempt portion of the gain is:

Exempt gain = Total gain × (Qualifying months of occupation ÷ Total months of ownership)

Deemed Occupation Periods

Certain periods of absence are treated as periods of deemed occupation, provided the property was the individual's PPR before and after the absence (unless it is the last period of ownership):

• Final 9 months of ownership — always exempt, no conditions. This is the most important deemed occupation period in exam questions.

• Any reason — up to 3 years in total during ownership.

• Working abroad in any employment — unlimited period.

• Working elsewhere in the UK in employment — up to 4 years.

Deemed occupation periods can be combined, but the individual must return to use the property as their PPR after each absence (except where unable to due to employment conditions).

Letting Relief

Prior to April 2020, letting relief provided an additional exemption (up to £40,000) where a PPR was let out. From April 2020, letting relief only applies where the owner is in shared occupancy with the tenant — i.e., the owner lives in the property at the same time. In practice, this significantly limits its availability.

4. Business Asset Disposal Relief (BADR)

BADR (formerly Entrepreneurs' Relief) is a highly popular exam topic because it involves both qualifying conditions and planning advice.

The Relief

BADR reduces the CGT rate to 10% on qualifying gains. There is a lifetime limit of £1 million per individual. Gains above the lifetime limit are taxed at standard CGT rates.

Qualifying Conditions

For a disposal of shares in a personal company, all three conditions must be met for a continuous 2-year period ending on the date of disposal:

• The company must be a trading company (or the holding company of a trading group).

• The individual must hold at least 5% of the ordinary share capital and at least 5% of the voting rights.

• The individual must be an officer or employee of the company.

For a disposal of a business (sole trader or partnership), the business must have been carried on for at least 2 years before the disposal.

Planning Points

• Check the 2-year qualifying period before advising a client to dispose — timing the disposal date to satisfy the condition is a key planning point.

• If the company's trading status is in doubt (e.g., significant investment income), consider whether it still qualifies.

• Where a client has already used their £1m lifetime limit, standard rates apply to any further gains — this may make gift relief more attractive.

• Consider whether selling to an Employee Ownership Trust (EOT) might provide full CGT exemption as an alternative.

5. Gift Relief (Holdover Relief)

Gift relief defers a capital gain when qualifying assets are gifted. The gain is not eliminated — it is held over and crystallises when the donee disposes of the asset.

Mechanics

A joint election by donor and donee reduces the donor's disposal proceeds to their original cost (effectively removing the gain). The donee's acquisition cost is set at market value less the held-over gain. On the donee's eventual disposal, the full gain (including the held-over amount) becomes chargeable.

Qualifying Assets

• Business assets used in a trade carried on by the donor (sole trader or partner).

• Shares in unquoted trading companies.

• Shares in quoted trading companies where the donor holds more than 5% of voting rights.

• Agricultural property and heritage property in certain circumstances.

Gift relief is also available on transfers that are immediately chargeable to IHT (e.g., gifts into discretionary trusts) even where the asset does not otherwise qualify.

6. Rollover Relief

Rollover relief allows a trader to defer a capital gain on disposal of a qualifying business asset by reinvesting the proceeds in a replacement qualifying asset.

Full Rollover

If the full proceeds are reinvested in a qualifying replacement asset, the entire gain is deferred. The replacement asset's base cost is reduced by the deferred gain.

Partial Rollover

If only part of the proceeds are reinvested, the amount not reinvested is immediately chargeable. The remainder is deferred into the replacement asset.

Qualifying Assets

Qualifying assets include: land and buildings used for trading purposes, fixed plant and machinery, goodwill (for acquisitions prior to April 2002 — note goodwill acquired after this date is a depreciating asset), and ships and aircraft.

The replacement asset must be acquired within a window from 12 months before to 36 months after the disposal.

7. Share Matching Rules

When an individual sells shares, the CGT cost must be matched to specific acquisitions. The rules prevent easy tax avoidance through selling and quickly repurchasing shares.

Matching Order

• Same-day acquisitions — shares bought on the same day as the disposal.

• Next 30 days — shares acquired within 30 days after the disposal (the bed and breakfasting rule — prevents selling for a loss then immediately reacquiring).

• The s.104 pool — all remaining shares of that class held prior to the disposal, pooled on a weighted average cost basis.

The s.104 Pool Calculation

The pool maintains two running columns: number of shares and total allowable cost. Each purchase adds to both columns. Rights issues increase both columns (rights shares are acquired at the rights price). Bonus issues add to the number column but not the cost column (they are free shares). Part-disposals reduce both columns proportionally.

In ATX, showing the pool workings clearly in a two-column format — including any adjustments for bonus or rights issues before the disposal — is essential for full marks.

8. Chattels Rules

Chattels are tangible moveable property (furniture, artwork, jewellery, and similar items).

Wasting Chattels

A wasting chattel has a predictable useful life of 50 years or less (e.g., a private motor car, a racehorse). Wasting chattels are exempt from CGT entirely.

Non-Wasting Chattels: The £6,000 Rule

For non-wasting chattels (e.g., antique furniture, fine art):

• If both proceeds and cost are under £6,000 — exempt.

• If proceeds exceed £6,000 — the gain is the lower of: actual gain, or 5/3 × (proceeds − £6,000). This is marginal relief.

• If proceeds are under £6,000 but cost exceeds £6,000 — the disposal proceeds are treated as £6,000 for the purpose of calculating the loss (restricts the loss).

9. Connected Persons and the Market Value Rule

A disposal to a connected person is deemed to take place at market value, regardless of the actual consideration. Connected persons include: spouses and civil partners, relatives (siblings, ancestors, lineal descendants), business partners and their relatives, and companies controlled by the individual.

A loss on a disposal to a connected person can only be set against gains on disposals to the same connected person — it cannot be offset against gains on arm's-length disposals. This restriction is frequently tested.

10. Common ATX Exam Mistakes on CGT

• Forgetting market value for connected persons — always check the relationship before using actual proceeds.

• PPR relief errors — candidates often miss the final 9-month deemed occupation period or fail to correctly identify which absence periods qualify.

• BADR qualifying period — not checking the 2-year condition is complete before applying the 10% rate.

• Wrong CGT rates — applying 10%/20% to residential property instead of 18%/24%, or vice versa.

• s.104 pool errors — not updating the pool for bonus or rights issues before processing the disposal; failing to show workings.

• Confusing gift relief and PPR relief — gift relief defers a gain; PPR relief exempts it. They are separate reliefs that can apply to different assets.

• Omitting the AEA — the £3,000 annual exempt amount should always be deducted unless the question states it has already been used.

• Not planning around the AEA — in planning questions, use of each spouse's AEA is a legitimate tax-saving strategy that should be mentioned.

For video lectures and worked exam questions on ATX CGT topics, visit Learnsignal's ATX study hub. Learnsignal is one of the only providers offering full ATX video content — a gap left open by OpenTuition, which does not cover this paper. Explore the full ATX course for comprehensive preparation across all syllabus areas.

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