ACCA Taxation (F6) Practice Exam

What is rollover relief?

1. A tax credit for property sales

2. Gain from the disposal of a qualifying asset can be rolled into acquisition cost of a replacement asset

3. Immediate taxation on sold assets

4. Reduction of taxable income from all property sales

The correct answer is: Gain from the disposal of a qualifying asset can be rolled into acquisition cost of a replacement asset

Rollover relief is a specific tax relief mechanism that allows individuals or businesses to defer paying capital gains tax on the disposal of a qualifying asset. When a qualifying asset is sold, any gain from that asset can be "rolled over" and added to the acquisition cost of a replacement asset. This means that instead of realizing a taxable gain at the time of disposal, the tax liability is postponed until the replacement asset is eventually sold. This approach is designed to encourage reinvestment in business assets by alleviating the immediate tax burden upon sale. The essence of rollover relief lies in the continuity of investment, supporting business growth without the deterrent of an immediate tax impact. While other options mention concepts relevant to taxation, they do not accurately depict the nature of rollover relief as a means to defer tax on gains by linking them to new investments.