ACCA Taxation (F6) Practice Exam

What are the conditions for qualifying for rollover relief?

1. Only assets in the same trade qualify

2. Old and new assets must have been used in trade, with specified purchase times

3. New assets must cost at least double the old asset

4. Rollover relief cannot exceed £40,000

The correct answer is: Old and new assets must have been used in trade, with specified purchase times

Rollover relief is a special tax relief that allows businesses to delay paying capital gains tax on the sale of a qualifying asset, provided that the proceeds are reinvested in a new qualifying asset. The conditions for qualifying for this relief are specific and revolve around the relationship between the old and new assets. The correct option states that both the old and new assets must have been used in trade and that there are specific timing requirements for their purchases. This is essential because rollover relief is designed to support continuity in business operations by allowing businesses to reinvest proceeds from sold assets into new assets that will also be utilized in their trade. The requirement to have assets used in trade ensures that the relief is only available to active businesses rather than speculative or investment activities. Additionally, the notion of specified purchase times means that there are predefined periods during which the new asset must be acquired following the disposal of the old asset, ensuring a timely reinvestment into the trade. This aspect is crucial for preventing gaps where potential tax advantages could be exploited without actual business reinvestment. The other options do not accurately capture the essential criteria needed for rollover relief. For instance, the stipulation that only assets in the same trade qualify is too narrow as rollover relief can apply to various