What is it?
Rollover Relief is a Capital Gains Tax (CGT) relief which may apply if you sell certain business assets and use all or part of the proceeds to buy new qualifying business assets.
The relief is actually a deferral of CGT becoming due on the old asset until the new asset is sold.
How do I qualify?
To qualify for Rollover Relief, the new assets must be acquired within 12 months prior or 36 months after the disposal of the old assets.
Your business must be trading when you sell the old assets and buy the new assets. Also the new assets must be used immediately in the business.
Qualifying assets include:
• Land
• Buildings
• Fixed plant
• Goodwill
• Basic payment entitlements
If an asset is deemed to be a depreciating asset, with an expected useful life of less than 60 years, the relief given is only temporary and the gain will become chargeable on the earlier of:
• The disposal of the asset
• Ceasing to use the asset in your trade
• 10 years from acquisition
What is Partial Relief?
Partial Relief may be granted where you only reinvest part of the proceeds from selling the old assets. The calculation of partial relief is not straightforward however and may not provide the answer you expect.
Reinvesting half the proceeds for example does not necessarily entitle you to relief on half the gain. This is because the reinvested funds are first offset against original cost before the gain. This effectively means that the amount not reinvested will become the taxable gain for CGT.
Example
Land that originally cost £100,000 is sold for £500,000 creating a gain of £400,000.
New land is purchased for £250,000, the first £100,000 is offset against cost therefore the gain is reduced by £150,000, leaving a taxable gain of £250,000 (equal to the amount not reinvested).
In the above example the base cost of the new land for CGT purposes would be £100,000 (cost less amount of Rollover Relief).
If you require further information regarding Rollover Relief please do not hesitate to contact us.
