ACCA Taxation (F6) Practice Exam

Which assets qualify for rollover relief?

1. Goodwill for companies, shares, land and buildings

2. Goodwill except for companies, land and buildings, fixed plant and machinery

3. Only residential properties

4. Shares and personal properties

The correct answer is: Goodwill except for companies, land and buildings, fixed plant and machinery

Rollover relief is a provision that allows taxpayers to defer the capital gains tax (CGT) liability that would arise from the disposal of certain qualifying assets, provided that the proceeds are reinvested in similar assets. This relief is particularly relevant in the context of business assets and can help promote reinvestment in economic activities. The correct answer is founded on the nature of the assets that typically qualify. Goodwill, land and buildings, and fixed plant and machinery are all recognized as business assets that can qualify for rollover relief under capital gains tax provisions. When a company disposes of such assets and reinvests in similar assets, the immediate CGT liability can be postponed until a future disposal occurs. In relation to the other options, goodwill for companies must be treated differently as it often relates specifically to the corporate structure, and certain rules may limit its qualification for rollover relief. Residential properties typically do not qualify for rollover relief in the same way that business-related assets do; hence, they do not appear in the correct response. Personal properties also have a distinct treatment under capital gains legislation, further distinguishing them from the specific assets that qualify for relief. This understanding of qualifying assets is critical for strategic tax planning, particularly for businesses looking to reinvest