CG60260 - Reliefs: replacement of business assets (roll-over relief): Who can claim relief
Roll-over relief is available to persons who carry on a trade and use the assets for the purposes of that trade (see section 152(1) of the Taxation of Chargeable Gains Act (TCGA) 1992). Section 157 TCGA 1992 and section 158 TCGA 1992 expand on these requirements and treat the activities listed as a trade for the purposes of roll-over relief.
There is no geographical restriction on the location of the trade. If the person is UK resident, roll-over relief is available even if the trade is carried on outside the UK.
For information about non-residents liable to UK tax, see CG60289.
‘Trade’ has the same meaning as for Income Tax purposes. For more information, see BIM20000.
Unincorporated associations and other bodies within section 158(1)(e) TCGA 1992
The activities of unincorporated associations or other bodies are treated as a trade for the purposes of roll-over relief. Examples include trade unions, sports clubs, and local constituency associations of political parties. Roll-over relief is not available for let property or other investments (see CG60281).
Successive trades
If all other conditions are met, relief is available to a person who disposes of an asset used in one trade and acquires an asset for use in another trade. The different trade can be carried on at the same time or successively.
Statement of Practice 8 (1981) confirms that HMRC will regard two trades as carried on 'successively' within the meaning of section 152(8) TCGA 1992 if the interval between the cessation of the old trade and the commencement of the new trade does not exceed three years. The two trades must be carried on by the same person, except in the case of a group of companies or where assets are used in an individual’s personal company.
Assets used for a personal company
Section 157 TCGA 1992 provides that a company is a ‘personal company’ of an individual if the individual can exercise at least 5% of the voting rights in that company (see also Boparan v HMRC [2006]).
A person can claim relief if they dispose of assets that they have provided for their personal company and used for the purposes of its trade. The new assets they acquire must also be provided to be used for the purposes of the trade of that company.
The trades referred to in section 152(8) TCGA 1992 must be carried on by the same personal company for roll-over relief to be available.
The company must be the individual’s personal company both when the old asset is disposed of and the new asset is acquired.
Partnerships
See CG60286.
Section 175 TCGA 1992 modifies the operation of the relief in groups of companies. For more information, see CG45930 to CG45965.
Relief for employees and office holders
Section 158(c) TCGA 1992 treats activities related to an office or employment as a trade for roll-over relief. This means that an individual who owns an asset can qualify for relief if the asset is used- and, for land or buildings, occupied- only in the course of their employment, and as directed by their employer.
Sometimes the employer also uses (and occupies) the asset for the purposes of their business. This use and occupation is not for the purposes of employee’s employment so on a strict reading of the legislation, the use (and occupation) conditions are not met. However, HMRC applies Statement of Practice 5 (1986) (SP5). Under, SP5, where an employee or office‑holder personally own an asset and allows their employer to use it in the trade without charging for it, and without a formal lease or tenancy, roll‑over relief may still be available.
Reorganisations of constituencies
Section 264 TCGA 1992 provides for roll-over relief for local constituency associations of political parties when parliamentary constituency boundaries are reorganised. The relief applies only to political parties that qualify under section 24 of the Inheritance Tax Act 1984.
For the purpose of section 264 TCGA 1992, ‘land’ includes houses and buildings of any tenure (see section 288 TCGA 1992).
Example: operation of roll-over relief on reorganisation of constituencies
A local constituency party is wound up following a change in constituency boundaries. The headquarters building, which cost £50,000, and has been used for the association’s activities, is sold for net proceeds of £120,000. The whole of the sale proceeds is transferred to a successor association and used to acquire a new property costing £140,000, to be used for the association’s activities.
Under section 264(5) TCGA 1992, the successor association is treated as if it had acquired and disposed of the headquarters building and can therefore claim roll-over relief under section 152 TCGA 1992. Full roll-over relief is due because all the proceeds have been used to acquire a new relevant asset, and the old asset had been used and occupied only for the purposes of the association throughout the period of ownership.