Making the most of rollover relief

What is rollover relief?

Rollover relief (under s152-160, Taxation of Chargeable Gains Act (TCGA) 1992) is a form of CGT reinvestment relief. In simple terms, where a qualifying asset (the old asset) is sold at a gain, and the proceeds are used to buy a new qualifying asset (the new asset), the gain on the old asset is held over against the cost of the new asset, deferring the tax liability until such time as the new asset is disposed of. You might also see the relief referred to as the replacement of business assets relief.

Interest in rollover relief has increased due to recent changes in the rates of CGT. For disposals made on or after 30 October 2024, the rates of CGT for most assets increased from 10% and 20% to 18% and 24% respectively, and the rate for assets qualifying for business asset disposal relief increased from 10% for 2024/25 to 14% for 2025/26 and 18% for 2026/27 onwards. However, the rules for claiming rollover relief can be complicated to apply and may not be widely understood, giving rise to the potential for errors and missed opportunities.

Who can claim rollover relief?

The general rule is that in order to claim rollover relief a person must be carrying on a trade within the charge to income tax or corporation tax.

In applying the general rule, it should be noted that:

• where the person has multiple trades, all trades are treated as one trade for this purpose. This means that the disposal proceeds of an asset used in one trade can be reinvested into an asset used in a different trade. Trades carried on by different members of a group of companies are also treated as one trade (s175, TCGA 1992);
• rollover relief can be claimed on assets owned personally by an individual but used in a trade carried on by their personal company (ie, a company in which the individual has at least 5% of the voting rights);
• assets used for the purposes of a trade or profession carried on by a partnership of which the person is a member are eligible for rollover relief. The relief must be claimed by each partner, rather than by the partnership and calculated in relation to their interest in the old and new asset (CG62093); and
• there are some limited circumstances in which relief is extended to activities that are not trades (see HMRC’s guidance at CG60260), including where an individual owns an asset personally that they use in their employment.

Subject to certain exceptions and restrictions, non-UK residents can claim rollover relief if the old and new assets are chargeable assets (ie, any gains on disposal are liable to CGT or to corporation tax on chargeable gains) in their hands.

Trustees can also be eligible for relief if they carry on a trade. By contrast, relief would not be available if the trustees were providing an asset for use in a beneficiary’s business.

Which assets qualify?

To be a qualifying asset, the asset must:

• be used in the trade (an intention to use the asset for trading purposes is not sufficient); and
• fall within the asset classes listed in the legislation. These include:
• land and buildings used in the trade;
• plant & machinery of the trade that is fixed in place and is not intended to be moved (this would exclude, for example, vehicles);
• goodwill. For companies, assets that fall within the intangible fixed assets rules are not qualifying assets for the purposes of CGT rollover relief (intangibles reinvestment relief may be available instead – see CIRD 20010); 
• ships and aircraft; and 
• farming and fishing-related assets, such as quotas and entitlements under single or basic payment schemes. 

Also, the old and new assets do not have to be in the same asset class as each other.  

However, the new asset must be used in the trade immediately on acquisition (although one of the concessions noted below might be available) and must not have been acquired mainly with a view to realising a gain. 

What about furnished holiday lettings?

Furnished holiday lettings (FHL) ceased to be treated as a trade with effect for assets acquired on or after 1 April 2025 for companies and 6 April 2025 for individuals, and so are no longer eligible for rollover relief. However, this does not mean there has been a cessation of a business at that date on which, for example, business asset disposal relief could be claimed.  

HMRC’s guidance (CG73505) confirms that rollover relief is still available where an asset used in a FHL business was disposed of before 1/6 April 2025 and a claim is made for the gain to be rolled over into the acquisition of an asset used in another trade. Advisers will need to keep track of gains that were rolled over into an FHL pre-April 2025 and ensure they are still deducted from the base cost when the property is eventually sold.

Does a time limit apply?

The new asset must be acquired within a 48-month window, which starts 12 months before the old asset was disposed of and ends 36 months after that disposal.  

HMRC has discretion to extend the time limit for acquiring the new asset in cases of compulsory purchase of land (Statement of Practice D6) or where there are acceptable reasons for the delay (CG60300). Cases where any delay was outside of the taxpayer’s control are more likely to be granted an extension. 

How is rollover relief claimed?

A claim for rollover relief must be made within four years from the end of the tax year (or, for companies, the accounting period) in which the disposal of the old asset, or the acquisition of the new asset, whichever is later, occurs. 

The taxpayer can benefit from provisional relief by making a declaration of their intention to invest in the new asset. This prevents the taxpayer from having to pay tax when they dispose of the old asset and then claim a repayment when they acquire the new asset, which, given the length of the reinvestment widow, could be some time later.  

A declaration for provisional relief ceases to have effect on the earliest of:

• the date the taxpayer makes a claim for rollover relief, replacing the declaration; 
• the date the taxpayer withdraws their declaration; and 
• the relevant date. This is: 
• for individuals: the third anniversary of the 31 January next following the tax year in which the disposal of the old asset took place; and
• for companies: the fourth anniversary of the last day of the accounting period in which the disposal of the old asset took place. 

Guidance on making a claim for rollover relief and a declaration for the purposes of provisional relief is given at CG60310 for all taxpayers and in tax return helpsheet HS290 for individuals. It should be noted that HMRC will charge interest on any tax paid late where a declaration for provisional relief is not superseded by a claim for rollover relief of the equivalent or a higher value.

How does rollover relief work?

For assets with full business use throughout their period of ownership (see below for where there is mixed use), rollover relief is given as follows: 

1. The consideration for the old asset is treated as being equal to its base cost (ie, the deemed proceeds on the disposal are an amount that gives rise to no gain/no loss). 
2. The amount of excess consideration (ie, the actual consideration/market value of the old asset, less the deemed proceeds from point 1, above) is deducted from the actual base cost of the new asset. 

Note that the way in which rollover relief is given is modified in the case of a depreciating asset (see below).  

The example below is based on HMRC’s example at CG60290: 

The CGT computations on the two assets, where rollover relief was claimed on the first disposal, would be as follows: 

What is a depreciating asset?

 A depreciating asset means an asset that on acquisition is a wasting asset (ie, it has an expected life of no more than 50 years, or that will become a wasting asset within 10 years of acquisition). In other words, it applies to any asset with an expected life not exceeding 60 years. 

If the new asset is a depreciating asset, the gain on the asset is not rolled over against the new asset’s base cost. This is because the base cost wastes away over time, so the rolled over gain might never crystallise. Instead, the gain on the old asset is deferred and comes back into charge on the earlier of: 

• 10 years from the date of acquisition of the new asset; 
• the date on which the new asset is disposed of; and 
• the date on which the new asset ceases to be used in the trade. 

HMRC’s guidance on depreciating assets is at CG60285. 

Do any restrictions apply?

Where there has only been a partial reinvestment of the disposal proceeds of the old asset, the amount that remains chargeable is the lower of:

• the disposal proceeds of the old asset that were not reinvested into the new asset; and
• the gain arising on the disposal of the old asset.

Relief is also restricted where there has been partial business use (CG60292):  

• of a building or structure in terms of floorspace. The part used in the business is treated as a separate asset to the part not used in the business, using a just and reasonable apportionment of the acquisition cost and disposal proceeds. Only the business part is eligible for rollover relief. This applies to both the old asset and the new asset. All other asset classes must be used solely for the business; or 
• of any asset over time (ie, where there has been 100% business use during some but not all of the ownership period)

An apportionment by both time and floorspace may be needed. 

Do any special rules apply?

Particular care should be taken with partnerships. Rolled over gains will crystallise in whole or part when a partner reduces their capital sharing ratio or retires from the partnership. In addition, if a limited liability partnership (LLP) ceases to trade and any partner previously claimed rollover relief on the acquisition of a qualifying LLP asset, the partner’s rolled over gain comes back into charge on the cessation of the LLP. 

There are several extra-statutory concessions (ESCs) that are relevant to rollover relief:

• ESC D22 – expenditure on improving existing assets (CG60280). 
• ESC D23 – the partition of land on the dissolution of a partnership (CG60286). 
• ESC D24 – assets not brought immediately into trading use (CG60270). 
• ESC D25 – acquisition of an interest in an asset already used in the trade (CG60280). 
• ESC D33 – CGT on compensation and damages (CG13020). 

The text of the ESCs can be found at page 43 onwards. 

If a trade ceases and within three years, the same trader acquires a qualifying asset that they use in a new trade, rollover relief may available (SP 8/81). 

Special capital gains rules apply for assets held before 6 April 1965 when CGT was introduced (Sch 2, TCGA 1992) and for gains rolled over before 31 March 1982 (Sch 3 and 4, TCGA 1992). 

How do I learn more?

The importance of rollover relief to businesses cannot be understated and it is important that agents are aware of the rules so that opportunities to make a claim can be spotted and errors in claims can be avoided.  

For further information, see ICAEW’s webpage for CGT. This includes links to CGT titles available through the Bloomsbury Accounting and Tax Service, which is free to view for eligible firms.    

Katherine Ford, Tax Manager, ICAEW