Roll-Over Relief Print

On the occasion of the disposal of qualifying assets used exclusively in the vendor’s trade, the vendor may defer the capital gains tax otherwise chargeable provided the entire sale proceeds are reinvested in further qualifying assets. These are:

  • Land and buildings occupied and used solely for the purpose of the trade
  • Fixed plant or machinery not forming part of a building
  • Ships, aircraft & hovercraft
  • Satellites, space stations, and spacecraft (including launch vehicles)
  • Goodwill*
  • Milk and potato quotas*
  • Ewe and suckler cow premium quotas*
  • Fish quota*
  • Syndicate rights of an individual underwriting member of Lloyds, including the rights of an individual held through a Members’ Agency Pooling Arrangement (“MAPA”) and treated as a single asset*
  • Payment entitlements under the single payment scheme for farmers falling within Title III of EC Council Regulation 73/2009*
  • Payment entitlements under the basic payment scheme (payment entitlement under the basic payment scheme for farmers under EU Council Regulation 1307/2013) – where the disposal of the old asset or acquisition of the new asset occurs after 19 December 2013.*

*these categories do not apply to companies in respect of assets acquired after 1 April 2002 as the acquisition would fall to be dealt with under the rules for intangible assets.

The acquisition of the new asset must take place within the period beginning 1 year before and ending 3 years after the disposal of the old asset, although in certain circumstances further time may be allowed by HM Revenue & Customs.

It is not necessary for the proceeds of the assets of one category to be reinvested in the same category, nor does the new asset have to be connected with the same trade.

Example:

Joe, who has traded as a butcher for the past 15 years disposes of the freehold premises of his shop, and goodwill, for proceeds of £850,000. The gain amounts to £370,000. The following year he purchases a General Store for £900,000.

As the purchase price exceeds the sale proceeds, the whole of the gain may be rolled over into the new asset. The cost of the new asset is then reduced by the rolled-over gain as follows:

£
Cost of General Store 900,000
Less rolled-over gain 370,000
Base cost of new asset 530,000

Where the new asset is a depreciating asset, for example a short leasehold building, the gain may only be deferred for a maximum period of 10 years. On the expiry of the period, the gain crystallises. However, if a further qualifying, non-depreciating asset is acquired within the 10-year period, the gain on the first asset may be carried forward to the third asset.

If the whole of the sale proceeds are not reinvested into qualifying assets, partial roll- over relief may be obtained provided the amount reinvested into qualifying assets is not less than the cost of the old asset. In these circumstances the relief due is restricted as follows:

Details are the same as above except that the cost of the General Store is £600,000

£
Gain eligible to be rolled-over 370,000
Deduct proceeds not reinvested: (£850,000 – £600,000) 250,000
Rolled-over Gain 120,000

The proceeds not reinvested, £250,000, are charged to CGT in the year of disposal.

If an asset is used in the trade for only part of its period of ownership, the amount of the gain which is available for roll-over relief is reduced proportionately.

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