CG60260 - Reliefs: Replacement of Business Assets (Roll-over Relief): Persons Entitled to Relief

Persons Carrying on a Trade

Application to Partnerships

Groups of Companies

Miscellaneous Extensions

Non-residents

Persons Carrying on a Trade

TCGA92/S152 confines entitlement to relief to persons (most frequently individuals and companies) carrying on a trade. The word trade is to be given the same meaning as it has for Income Tax purposes, see BIM20000+. Trade therefore includes activities such as farming and the commercial letting of furnished holiday accommodation.

Under TCGA92/S152(8), relief is available to a person who disposes of an asset they used in one trade and acquires an asset for their use in another trade, either carried on by them simultaneously with or successively from the first. Statement of Practice 8/81 confirms that HMRC will regard the two trades as carried on 'successively' within the meaning of TCGA92/S152(8) provided that the interval between them does not exceed three years.

Relief is provided by TCGA92/S157 where an individual both disposes of and acquires qualifying assets to be used in a trade carried on by their personal company. For these purposes, an individual’s ‘personal company’ is one in respect of which they can exercise at least 5% of the voting rights. Following (SpC 587), it should be noted that the individual needs to be able to exercise these voting rights in the trading company in a personal capacity, i.e. the voting rights cannot actually be vested in another company that they control.

In the context of a claim under TCGA92/S157, the two or more trades referred to in TCGA92/S152(8) need to be carried on by the same personal company for roll-over relief to be available.

Application to Partnerships

The effect of TCGA92/S59(1) is to treat transactions in partnership assets as having been made by the partners rather than by the partnership. Therefore a claim for roll-over relief under TCGA92/S152 cannot be made by a partnership. However, claims can be made by a partner in a partnership but only to the extent of his interest in the old and the new assets and only to the extent that those assets are used for the purposes of a trade carried on by him (either alone or in partnership).

Each partner’s share of the disposal consideration of the old assets and costs of acquisition of the new assets must be established in order to determine the amount of relief due. Guidance on the computation and method of charging gains which accrue on disposals of partnership assets is at CG27000 and a worked example specific to roll-over relief is at CG60293.

A limited liability partnership (LLP) which is carrying on a trade or business with a view to profit is treated for capital gains purposes in the same way as a non-corporate partnership, see CG27020+. This means that the LLP itself is regarded as transparent for tax purposes so that any dealings in partnership assets are treated as dealings by the members. Roll-over relief is available to the members of a LLP subject to the relevant conditions being met.

When a LLP ceases to trade, see CG27050, the transparency treatment is switched off and the LLP is treated thereafter as a body corporate. In certain circumstances TCGA92/S156A provides for rolled-over gains to be brought back into charge immediately before the transparency treatment ceases to apply, see CG27080.

Groups of Companies

TCGA92/S175 modifies the operation of the relief in groups of companies, see CG45930 onwards.

Miscellaneous Extensions

Beyond those carrying on a trade, TCGA92/S158 extends the availability of roll-over relief to:

  • the discharge of the functions of a public authority
  • the occupation of woodlands where these are managed by the occupier on a commercial basis and with a view to the realisation of profits
  • a profession, vocation, office or employment
  • the activities of a non-profit making body which are wholly or mainly directed to the protection or promotion of the trade or professional interests of its members
  • the activities of certain unincorporated associations and other bodies chargeable to Corporation Tax. The persons must be bodies not established for profit whose activities are wholly or mainly carried on otherwise than for profit. Examples include trade unions, sports clubs and local constituency associations of political parties. Both the old assets and the new assets must be used by the body for its activities. Where the assets are land or buildings, they must also be occupied by the body for its activities. Relief is not available for let property or other investments
  • a company which holds assets used and, in the case of land and buildings occupied, by a non-profit making unincorporated association, where the latter has at least 90% ownership of the former’s ordinary share capital, is beneficially entitled to at least 90% of its distributable profits and would be entitled to at least 90% of its assets on winding up

This extension effectively operates by treating the above activities as a trade, for the purposes of the provisions within TCGA92/S152 through TCGA/S157. As an example, as TCGA92/S152(8) allows roll-over relief where the old and new asset are used in different but successive trades carried on by the claimant, this rule also applies (for example) to successive vocations.

As is set out in Statement of Practice 5/86, the qualifying use of assets by an employee etc. for the purposes of TCGA92/SS152 & 153 will include any use or occupation of those assets by him, in the course of performing the duties of his employment or office, as directed by the employer. Relief should not be denied because the asset is also used by the employer for the purposes of the employer's trade. The sole use condition should be regarded as satisfied unless the asset is used for some purpose alien to the office or employment.

Non-Residents

Persons other than companies, who are not resident in the UK but carry on a trade in the UK through a branch or agency, are liable to Capital Gains Tax on chargeable gains on disposals of certain assets situated in the UK, see CG25500+.

Companies that are not resident in the UK but carry on a trade in the UK through a permanent establishment, are liable to Corporation Tax on chargeable gains on disposals of certain assets situated in the UK, see CG42100+.

The assets liable to UK tax are referred to as ‘chargeable assets’ (TCGA92/S159 (4)). The availability of roll-over relief for gains on qualifying assets (see CG60280P) by such persons is restricted.

Where such a person disposes of assets which are chargeable assets in relation to him at the time of disposal, roll-over relief is only available if the replacement assets are also chargeable assets in relation to him immediately after the time when they are acquired.

Subject to certain exceptions, relief is available if the claimant is not resident in the UK when the disposal of old assets occurs but has become resident in the UK when the acquisition of the new assets occurs.

The exceptions referred to above are where, immediately after the new assets are acquired:

  • the claimant is dual resident (defined as being resident in the UK but treated, for the purposes of a double taxation relief arrangement, treated as being non-resident) and
  • the new assets are prescribed assets, being those assets that the individual is not liable to UK tax on their disposal, due to a double taxation relief arrangement

In these circumstances, relief is precluded. This is because the effect of a double taxation relief arrangement is to prevent any UK tax liability arising on gains on disposal of the new assets even though they are situated in the UK and the person is resident in the UK.

Separate to the above, TCGA92/S159A offers roll-over relief to non-resident persons where both the asset disposed of an acquired is an interest in UK land.