Understanding CGT Rollover Relief

Business Asset Rollover Relief, commonly known as CGT Rollover Relief, offers a valuable opportunity for taxpayers to defer Capital Gains Tax (CGT) on gains from selling or disposing of certain business assets. By reinvesting the proceeds into new business assets, taxpayers can postpone the CGT liability. The gain from the old asset is effectively transferred into the cost of the new asset, deferring the tax until the new asset is eventually sold.

If only a portion of the proceeds from the sale is reinvested, a partial rollover claim is possible. Additionally, provisional rollover relief can be claimed if new assets are expected to be purchased but have not yet been acquired when filing returns with HMRC. Interestingly, taxpayers can also claim rollover relief when using the proceeds to improve existing assets. The extent of rollover relief depends on the total amount reinvested in new assets.

To qualify for this relief, several conditions must be met. New assets must be purchased within three years of selling or disposing of the old asset (or up to one year before the sale). In some cases, HMRC may extend these time limits. Both the old and new assets must be used in the taxpayer’s business, and the business must be actively trading when the old assets are sold and the new assets are purchased. Claims for relief must be made within four years from the end of the tax year in which the new asset was purchased (or the old one was sold, if later).