Roll-over relief for capital assets

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Roll-over relief for capital assets
  • How the relief works
  • Example
  • Partial reinvestment
  • Depreciating assets
  • Time limits
  • Qualifying assets
  • Classes of asset
  • Improvement works following acquisition
  • No reinvestment in same asset
  • More...

Roll-over relief for capital assets

This Practice Note is about roll-over relief for capital assets, which is a deferral of capital gains tax, or corporation tax on chargeable gains, for certain disposals of business assets where the proceeds of the disposal are reinvested in other business assets.

Where a business disposes of plant and machinery so that it can upgrade to more up-to-date equipment, or sells land and buildings so that it can relocate to new premises, it may realise a chargeable capital gain (see Practice Note: What is a capital gain?).

If traders in this situation were to suffer an immediate tax charge, this could act as a disincentive for businesses to modernise, expand or relocate. Hence the existence of roll-over relief for business assets. The broad rationale behind the relief is that capital gains on business assets can remain untaxed for so long as the gains are reinvested in other assets used in the business.

Where a person:

  1. carries on a trade

  2. disposes of a qualifying asset (the old asset) that is used in the trade

  3. acquires another qualifying asset (the new asset) to use in either the same trade, or a different trade carried on by the same person

  4. both the old and new asset are within certain permitted classes, and

  5. the acquisition is within certain time limits

that person may be able to defer

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