What is rollover relief?

What is rollover relief?

• A. It postpones paying tax on a gain if it reinvests into a replacement asset.
• B. It allows tax credits for foreign taxes paid.
• C. It provides a deduction from taxable income for asset purchases.
• D. It grants a temporary tax holiday on all gains.

Answer: (B)

Rollover relief is about deferring tax on a gain by reinvesting the proceeds into a replacement asset. When you dispose of a qualifying asset and reinvest the proceeds into another asset that is used in the same business or trade, the gain does not become chargeable at the time of disposal. Instead, the gain is effectively rolled into the cost basis of the replacement asset. This means the tax liability is postponed until you eventually dispose of the replacement asset, and your base cost for that asset is increased by the amount of the rolled-over gain. This relief applies only to certain assets and specific conditions; it is not a tax credit for foreign taxes, nor a general deduction, nor a temporary holiday on all gains.

Rollover relief is about deferring tax on a gain by reinvesting the proceeds into a replacement asset. When you dispose of a qualifying asset and reinvest the proceeds into another asset that is used in the same business or trade, the gain does not become chargeable at the time of disposal. Instead, the gain is effectively rolled into the cost basis of the replacement asset. This means the tax liability is postponed until you eventually dispose of the replacement asset, and your base cost for that asset is increased by the amount of the rolled-over gain. This relief applies only to certain assets and specific conditions; it is not a tax credit for foreign taxes, nor a general deduction, nor a temporary holiday on all gains.