Rollover relief

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Rollover relief
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Rollover relief is a relief that enables a charge to capital gains tax (for a company, to corporation tax) to be deferred when the proceeds from the disposal of an asset are reinvested in a new asset. Any gain arising from the disposal of the new asset will be correspondingly increased (unless the gain is, once more, rolled over).

Rollover relief is only available for the following types of asset[1]:

  • building for the purposes of trade
  • any land used only for the purposes of trade
  • fixed machinery and plant
  • ships, aircraft and hovercraft
  • goodwill
  • satellites, space stations and space vehicles
  • milk quotas and potato quotas
  • ewe and suckler cow premium quotas
  • fish quotas
  • oil licences

Note, however, that regarding plant and machinery, rollover relief is only available if it is fixed and so, for example, motor vans and fork lift trucks do not qualify.

To get the relief you must use the old and new assets in the same business. However, if you carry on several trades, they are treated as one for this purpose. Relief is still available if you cease one trade and start another. Also, rollover relief applies regarding purchases and sales by you of personally owned assets used in your 'family company'[2].

Capital gains tax

Rollover relief is applicable to companies. Also, a special extension of the rules covers gilts obtained by companies in exchange for group companies in the aircraft and shipping industries on compulsory acquisition through nationalisation. An election is required within four years of the exchange and then the normal new compensation stock rules do not apply.

Dual-resident companies obtain no rollover relief where they replace a UK business asset with one overseas. Also rollover relief is denied where the replacement asset is outside the UK tax charge and is acquired by a dual resident group member.

To fit in with the new self-assessment rules, provisional rollover relief claims will be allowed, including on compulsory purchase. You will need to declare in your tax return that you intend to re-invest the proceeds in qualifying assets and will lose your relief unless you reinvest within three years of the disposal[3]

Extending capital gains tax rollover relief on marriage breakdown

CGT marriage breakdown rollover relief to in specie transfers of personal superannuation interests from a small superannuation fund to another complying superannuation fund under specific conditions. This enables separating spouses to achieve a 'clean break' from each other in terms of their superannuation arrangements.

The law provides CGT rollover relief on marriage breakdown for a transfer of any CGT asset reflecting the personal interest of either spouse (but not both) in a small superannuation fund to another complying superannuation fund if that transfer satisfies specific conditions. The amendments also allow[4]:

  • the existing CGT marriage breakdown rollover relief between small superannuation funds to extend to transfers from a small superannuation fund to another complying superannuation fund
  • the CGT marriage breakdown rollover relief for transfers of non-superannuation assets to ensure that they apply to transfers pursuant to written agreements made under Western Australian, Tasmanian, Queensland or Northern Territory laws relating to de facto marriage breakdown

Footnotes

  1. J. Law 2018, p.312
  2. W. Sinclair, E. Lipkin 2010, p.290
  3. W. Sinclair, E. Lipkin 2010, p.292
  4. The Taxpayers Guide 2015, p.265

References

Author: Ewa Szczyrbak