Chapter 18 - Rollover Relief

Question 1

Introduction

Answer 1

Sometimes called ‘replacement of business assets’ relief. Relief is given when a trader sells a business asset and replaces it with another. It lets a trader defer the payment of CGT

Question 2

Rollover Relief

Answer 2

A deferral relief that pushes the gains back to a later period in time. The amount of the gain deferred is rolled over and deducted from the base cost of the new asset purchased

Question 3

Proceeds Not Fully Reinvested

Answer 3

Where a taxpayer does not spend all of the sale proceeds, the amount of cash retained is immediately chargeable to CGT, the rest can be used as rollover relief

Question 4

Conditions for the Relief

Answer 4

Can only be claimed by persons carrying on a trade. It can also be claimed if a company sells and asset and reinvests the proceeds in a replacement.

Question 5

Conditions Cont.

Answer 5

The old asset must be used for business purposes. Can also claim on assets owned by an individual, but the asset is used by his personal company (5% voting rights)

Question 6

Two Trades

Answer 6

Where someone is carrying on two trades at the same time, they are regarded as one trade for rollover relief.

Question 7

Qualifying Assets

Answer 7

Land and Buildings
Goodwill (individuals only)
Fixed plant and machinery
Ships/aircraft/hovercraft
Satellite/space stations/spacecraft
Milk/potato/fish quotas

SHARES DON’T QUALIFY

Question 8

Acquisition Time Limits

Answer 8

New asset must be acquired within a 4 year window, running from 1 year prior to, and 3 years after, the sale of the asset being replaced.

Question 9

Claim

Answer 9

Rollover relief must be claimed within four years from the end of the tax year in which the gain arises or the new asset is acquired (whichever is later)

Question 10

Note

Answer 10

Rollover relief is not automatic. Must be claimed

Question 11

Interaction with ER

Answer 11

Where a taxpayer makes a material disposal of business assets, ER relief may be available. But, a single asset qualifies if part or all of the business is also sold.

Question 12

ER Example

Answer 12

When a taxpayer sells their business with related assets and reinvesting in a new business and qualifying assets. In this case, ER is available on any gains remaining after RR is claimed.