Rollover Relief


Rollover Relief

BUSINESS ASSET DISPOSAL RELIEF (BADR) is NOT available for the disposal of single business assets in isolation, unless they relate to the CESSATION of trade or an ASSOCIATED DISPOSAL. Where BADR is UNAVAILABLE on the disposal of a single asset in isolation, ROLLOVER RELIEF might be available.

How Does Rollover Relief Work?

If an individual sells a QUALIFYING BUSINESS ASSET and REINVESTS the proceeds in a REPLACEMENT QUALIFYING ASSET within a QUALIFYING TIME PERIOD, then the individual can make a ROLLOVER RELIEF claim to defer the gain. This is achieved by deducting the gain from the ACQUISITION COST of the new asset, thereby LOWERING the BASE COST.

What are QUALIFYING BUSINESS ASSETS?

The main assets which qualify for ROLLOVER RELIEF are;

  • LAND & BUILDINGS (LB) used for TRADING PURPOSES (LB4TP).
  • FIXED PLANT & MACHINERY (FPM) – not movable Plant & Machinery
  • GOODWILL (For UNINCORPORATED businesses ONLY)

What is the QUALIFYING TIME PERIOD?

The replacement asset must be bought with a 4 YEAR TIME PERIOD, either 1 YEAR BEFORE the sale of the asset it is replacing and 3 YEARS AFTER.

What if only PART of the PROCEEDS are REINVESTED?

ALL of the net proceeds MUST be reinvested for ALL of the GAIN to be DEFERRED.

If only PART of the PROCEEDS are REINVESTED, the GAIN chargeable is the LOWER of:

  • The whole of the GAIN.
  • The AMOUNT OF THE GAIN NOT REINVESTED.

Restriction of ROLLOVER RELIEF for NON-BUSINESS USE

Only the business portion of an asset can receive ROLLOVER RELIEF. If there is PRIVATE USE, or the asset is NOT used for BUSINESS USE for the whole period of ownership, then proportionate restriction of ROLLOVER RELIEF applies.


Reinvestment in Depreciating Assets

When proceeds are reinvested in a DEPRECIATING ASSET the gain is NOT deducted from BASE COST of the new asset but FROZEN until the EARLIEST of:

  • The DISPOSAL of the new asset
  • The new asset STOPS being used for trading purposes
  • 10 YEARS after the asset is purchased.

DEPRECIATING ASSETS are defined as:

  • FIXED PLANT & MACHINERY (FPM)
  • Assets with an expected life of less than 60 years (eg LEASE < 60 years)