ACCA Taxation (F6) Practice Exam

Which assets do not qualify for rollover relief?

1. Goodwill for individuals

2. Goodwill for companies, shares

3. Land and buildings

4. Fixed plant and machinery

The correct answer is: Goodwill for companies, shares

Rollover relief is a tax relief that enables business owners to defer making a tax payment on a gain when they sell one asset and buy another similar asset within a specific timeframe. However, not all types of assets are eligible for this relief. Goodwill for companies and shares do not qualify for rollover relief because they are not treated as trading assets in the same way that physical or direct business assets are. While goodwill can be associated with business value, it doesn't fall under the category of assets for which rollover relief is intended. This is primarily because goodwill is often seen as an intangible asset that represents the reputation of a business rather than a tangible capital asset that can be rolled over when sold. On the other hand, assets like land, buildings, and fixed plant and machinery typically do qualify because they are classified as tangible business assets used in the day-to-day operations of a business. These assets can be exchanged for similar assets allowing for rollover relief, keeping the tax liability deferred when adhering to qualifying conditions. This distinction in asset types ultimately clarifies why goodwill for companies and shares precisely do not qualify for rollover relief.