What is rollover relief for CGT on business assets in the UK?

Full answer

Rollover relief is available under Section 152 Taxation of Chargeable Gains Act 1992. It is one of the most valuable CGT reliefs for trading businesses, allowing them to reinvest proceeds without an immediate tax charge. Qualifying assets: land and buildings used in the trade, fixed plant and machinery (not cars), goodwill, milk/potato quotas, ewe/suckler cow premium quotas, and ships, aircraft, and hovercraft. Not all assets qualify -- investment properties and assets not used in a trade are excluded. How it works: if a qualifying asset is sold and a replacement qualifying asset is purchased, and the entire sale proceeds are reinvested, the gain on the original asset is deducted from the cost of the new asset. Example: sell old factory for £500,000 (original cost £200,000, gain £300,000). Buy new factory for £500,000. With full rollover, no CGT is due immediately; the new factory's base cost is reduced to £200,000. Partial rollover: if only part of the sale proceeds are reinvested, the unspent portion is immediately chargeable. Example: sell for £500,000, reinvest £400,000 -- £100,000 is immediately taxable, and the remaining £200,000 gain rolls into the new asset. Timing: the replacement must be purchased within 3 years after (or 1 year before) the disposal of the original asset. HMRC can extend time in exceptional circumstances. Incorporation: rollover relief also applies when a business is transferred to a company (incorporation relief -- see separate answer). Interaction with BADR: gains that have been rolled over lose their identity as trading gains for BADR purposes when eventually crystallised, unless at that point the conditions for BADR are still met. HMRC guidance: CG60250.

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