Business Asset roll over relief is the deferment of capital gains tax due on dispose of old assets until and unless the new assets that replace the old ones are also sold. If Mr John sells his business van for £35,000 (purchase cost £29,000) and buys a new van for £40,000, he can claim relief from paying his capital gains tax. The relief is extended till the time he sells his second van.
In case, the older asset is sold at higher value than purchase cost of the new asset, you will be eligible only for a partial capital gains rollover relief. If, however , you are yet to purchase the new asset but have already sold the old one, you can make claim for a provisional relief; as long as you make express intention of buying the new asset. Provisional relief is complex and subject to many terms and conditions. You must contact a professional tax advisor if you plan to apply for provisional roll over relief.
Business roll over relief is available for people or entities that are trading, into furnished holiday letting business, are providing professional or vocational services or are disposing of land by a compulsory purchase. The rollover relief is also available to those people who occupy and manage commercial woodlands for profit purposes or those who provide assets to their personal companies.
Remember personal company is any company in which you have voting rights equivalent to or greater than 5%. You will be eligible for the relief only if both the new and old assets were intended for use as company assets. Similarly, there are conditions for relief in case of furnished holiday letting businesses. These are set out in ‘UK property notes’ (UKPN 3).
For traders, the new and old assets should either be used in the same trade or the new asset should be used in another trade that is either running simultaneously or starting immediately after the first one ceases. In certain individual cases, HMRC have accepted relief claims that have a period of Three years or less between the end of one trade and start of another. This is again a complex area and requires professional assistance.
Capital gains tax rollover relief is also available in scenarios where the old asset was used in trade but that new asset will be used in personal company. People who are not residents of UK, but are involved in trading through means of a personal establishment will be eligible for the rollover relief only if they use the new asset for said personal establishment.
Interestingly in its latest guidelines, the HMRC has explicitly described what an asset can mean. An asset for purposes of business asset rollover relief can be:
- Interests in buildings or part of buildings
- Interests in land
- Any machine or a fixed plant setup
- Goodwill
- Ships, planes, satellites, hovercraft or space craft
- Quotas for milk, potatoes, ewe, suckler cow or fish
- Payment entitlements (only single payment or basic payment schemes)
- Lloyds’s syndicate capacities
There are conditions attached to occupation of land and buildings, improvements and extensions, fixed plant and machinery, depreciating assets and compulsory purchased land. Only a professional tax advisor will be able to help you with filing tax returns and claiming rollover reliefs if you are in any one of the above situations. You may claim the relief within four years of disposal of old asset or purchase of new asset; which ever is the later.
Make sure you apply for capital gains tax roll over relief with complete information of dates of sale/purchase and costs of old and new assets. It is preferable that you attach the relief claim form with your capital gains summary. If you are seeking professional advice, you can contact Certax Fitzrovia Ltd. We are a team of competent accountants and tax advisors, offering you the trademark Certax quality and reliability.
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