Business Asset Rollover Relief - should you roll over?

As a business owner, you have a number of different Capital Gains Tax (CGT) reliefs available to you. These include Incorporation Relief; Gift Relief; Entrepreneurs Relief; and the Business Asset Rollover Relief.

Often overlooked by many, Business Asset Rollover Relief is a valuable way of deferring CGT. Essentially, Rollover Relief allows you to delay paying CGT when you dispose of a qualifying business asset and buy another.

Which assets qualify?

Qualifying assets include:

• Land and buildings
• Fixed plant or machinery
• Ships and aircraft
• Satellites, space stations and spacecraft
• Plus farm and fishing quotas (if you’re not subject to corporation tax)

How is it calculated?

Steven owns a shop just outside the city which he bought for £100,000. He then sells this shop for £120,000 and buys a new shop in the city for £150,000.

The chargeable gain on the first asset would be: £120,000 - £100,000 = £20,000 Normally, he would pay CGT on this £20,000.

However, Rollover Relief is claimable up to the amount of the gain, which means £20,000 gain – £20,000 relief = £0 CGT

As a result of Rollover Relief, the cost of the new asset (the new shop in the city) is reduced for CGT purposes.

£150,000 - £20,000 (of Rollover Relief) = £130,000 is the new cost of the shop for tax CGT purposes.

Time limits

It’s worth noting that there are some time limits for Rollover Relief and the timings for the purchase of the new asset.

The new asset – the new asset should be acquired in the period beginning 12 months before the disposal of the old asset or 3 years after the disposal of the old asset.

The claim – the claim must be made within 4 years from the end of the tax year when you bought the new asset (i.e. if you bought the new asset on 10 January 2014, you need to claim by 5 April 2018).