ACCA Advanced Taxation (ATX) Practice Exam

Is rollover relief available on goodwill for companies?

1. Yes, for all companies

2. No, only for individuals

3. No, it is not available for both

4. Yes, with certain conditions

The correct answer is: No, only for individuals

Rollover relief is a tax relief that allows companies to defer the payment of Capital Gains Tax (CGT) on the disposal of certain types of assets if they reinvest the proceeds into new qualifying assets. However, in the context of goodwill, UK tax law provides specific guidelines regarding rollover relief. The correct understanding is that while individuals can claim rollover relief on certain disposals, the same does not extend to companies with respect to goodwill. Rollover relief is typically available for certain business assets under particular conditions, but the disposal of goodwill is treated differently. Goodwill itself is not classified as a qualifying asset for rollover relief for companies. This limitation reflects the recognition that goodwill is considered part of the essence of a business and its value does not strictly follow the same treatment as tangible assets or other qualifying capital assets. In contrast, individuals may have more expansive options concerning business assets and goodwill that can qualify under specific contexts, but companies face restrictions that prevent them from applying rollover relief on goodwill transactions. Therefore, the statement that rollover relief is not available for companies regarding goodwill accurately reflects the legal position within UK tax legislation.