ACCA Taxation (F6) Practice Exam

Can the annual exempt amount of capital gains tax be carried forward or back?

1. Yes, it can be carried forward

2. No, it cannot be carried forward or back

3. Yes, it can be rolled over to the next tax year

4. Yes, but only for specific types of assets

The correct answer is: No, it cannot be carried forward or back

The correct choice indicates that the annual exempt amount of capital gains tax cannot be carried forward or back. This reflects the rules governing how the annual exempt amount operates within the context of capital gains tax. Each tax year has its own exempt amount, which effectively resets and applies only to the gains realized within that specific year. Therefore, if an individual does not utilize the full exempt amount in a given year, they cannot roll it over to offset gains in subsequent or prior years. Understanding the nature of the annual exempt amount is crucial. It is designed to provide a specific level of relief each year, ensuring that only gains exceeding this threshold are subject to capital gains tax. As such, this structure reinforces the importance of tax planning within individual tax years rather than allowing for flexibility across different tax periods. Other options suggest the ability to carry forward the exempt amount or apply it to different tax years, which contradicts the established rule that each year operates independently in this context. Knowing that the annual exemption is strictly limited to the year in which the gains are realized is essential for effective capital gains tax strategy.