Chapter 19 Rollover relief and depreciating assets

Question 1

19.1 depreciating assets

Answer 1

A depreciating asset is similar to a wasting asset, it has a useful life not exceeding 60 years. The most common types of depreciating assets for rollover relief purposes are leases of less than 60 years and fixed plant and machinery. However, where an item of fixed plant and machinery has become part of the fabric of a building, the cost of the fixed plant it treated as expenditure on the building itself and will not be treated as expenditure on a depreciating asset.

Question 2

19.2 Purchase of a depreciating asset

Answer 2

Where the asset purchased is a depreciating asset, we do not take the gain on the original asset and reduce the base cost of the replacement. Relief is given by freezing the gain on the old asset for a certain period of time. The gain crystallises on the earliest of three events:
• The depreciating asset is sold
• The trader stops using the asset within their trade
• Or 10 years after the acquisition of the depreciating asset