How to roll-over capital gains
Business Asset Rollover Relief allows for the deferral of Capital Gains Tax (CGT) on gains when you sell or dispose of certain assets and use all or part of the proceeds to buy new assets. The relief means that the tax on the gain of the old asset is postponed. The amount of the gain is effectively rolled over into the cost of the new asset and any CGT liability is deferred until the new asset is sold.
Where only part of the proceeds from the sale of the old asset is used to buy a new asset a partial rollover claim can be made. It is also possible to claim for provisional rollover relief where you expect to buy new assets but haven’t done so yet. Finally, rollover relief can be claimed if you use the proceeds from the sale of the old asset to improve assets you already own.
There are qualifying conditions to be met to ensure entitlement to any relief. However, as a general rule you can claim the relief if:
- you are trading (including companies);
- you are carrying on a business of furnished holiday lettings;
- you are occupying commercial woodlands and managing them commercially to make a profit;
- you are carrying on a profession, vocation, office or employment;
- you are providing an asset to your personal company; or
- you have disposed of land by a compulsory purchase.
Both the old assets and the new assets must be within specified asset classes. This includes interests in buildings or parts of buildings, interests in land, fixed plant or machinery and goodwill.
The new assets must be purchased either in the 12 months before or the 36 months after the disposal of the old assets. Under certain circumstances, HMRC has the discretion to extend these time limits.
It is also important to consider if it will be more beneficial to claim Entrepreneurs’ Relief (if eligible) and pay the CGT due at the lower 10% rate at the time of the disposal of the old asset. We would of course be happy to advise you on the best way to structure any asset disposal. Please call if you are considering a sale. It is always best to plan in advance.