Rollover reliefs

By Tolley
Rollover reliefs

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Rollover reliefs
  • Conditions for the relief
  • Personally owned assets used in the same personal company
  • Qualifying assets
  • Proceeds reinvested in full
  • Interaction with entrepreneurs’ relief
  • Rollover relief and depreciating assets
  • Purchase of a depreciating asset
  • Parking
  • Provisional claims
  • Other points
  • Partial business use
  • Buying more than one asset
  • Proceeds not fully reinvested
  • Claims

Rollover relief, or ‘replacement of business assets’ relief, allows a trader to defer the payment of capital gains tax when he sells a business asset and replaces it with another in prescribed circumstances.

TCGA 1992, s 152
Conditions for the relief

Rollover relief can only be claimed by persons carrying on a trade. Individuals trading as sole traders or within a partnership can claim rollover relief. Rollover relief can also be claimed if a company sells an asset and reinvests the proceeds in a replacement asset.

TCGA 1992, s 152(1)

The old asset, ie the asset being sold, must be used for the purposes of a business carried on by the trader. Rollover relief is also available where an individual owns an asset, but the asset is used by his personal company (ie where the individual owns at least 5% of the voting shares).

The new asset, ie the asset being acquired, must be immediately taken into use for the purposes of the trade. It is not possible for a trader to buy an asset and use it for non-trading purposes if rollover relief is to be claimed. A trade in this context can include furnished holiday lettings. For example, if a landlord sells a furnished holiday let and makes a capital gain, rollover relief will be available if the landlord reinvests all or part of the proceeds in acquiring a new furnished holiday let.

TCGA 1992, s 241; ESC D24

If an individual is carrying on two trades at the same time, these two trades are regarded as one single trade for rollover relief purposes. Therefore, if an individual makes a capital gain on an asset used in trade ‘A’, he can claim rollover relief by buying a business asset and using it for the purposes of trade

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