CG60281 - Reliefs: replacement of business assets (roll-over relief): relevant assets - land and buildings
Overview
Land and buildings are relevant assets for roll-over relief under section 155 Class 1 Head A of the Taxation of Chargeable Gains Act (TCGA) 1992. However, in some circumstances, roll-over relief is not available for assets within this class. The relevant legislation is at section 156 TCGA 1992.
Separation of land and buildings
For capital gains purposes, land normally includes any buildings (see section 288 TCGA 1992). For roll-over relief, land and buildings are treated as separate assets. For example, a hotel is made up of two assets: the land, and the hotel building. It is necessary to apportion acquisition costs and disposal consideration, and make a separate computation for each asset. A separate claim can be made for the disposal of each asset.
Building or part of a building
The terms “building” or “part of a building” should be given their ordinary, everyday meaning.
Permanent or semi-permanent structure
There is no statutory definition of a permanent or semi-permanent structure.
Occupied as well as used only for the purposes of the trade
To qualify for roll-over relief, a building, land, a structure, or part of a building or structure must be occupied and used only for the purposes of the person’s trade unless one of the exceptions in section 156 TCGA 1992 applies.
If a person provides land or buildings for their personal company to use, the company must occupy and use them only for the purposes of its trade.
When land may count as more than one asset
Sometimes land can amount to more than one separate asset. If evidence shows this is the case, it is necessary to look at each asset on its own and check whether each part was used only for the purposes of the trade. Further guidance on when land may comprise more than one asset is at CG71800.
What “occupied” and “used” mean
There is no statutory definition of “occupied” and “used”. We therefore rely on their ordinary dictionary meaning, supported by case law.
A person is normally regarded as occupying a building or land when they have physical possession or control of it for the purposes of their trade.
An asset is used for the purposes of a trade when it directly performs a role in that trade.
Examples include buildings used as a shop, factory, office, or warehouse.
Case law
Temperley v Visibell [1973]
The court held that:
simply buying land with the intention of building a relevant asset
making site visits
obtaining planning permission
is not enough to show occupation and use for the purposes of the trade.
If land is acquired with the intention of erecting a building for use in the owner's trade, but the plans never proceed, and the land is instead sold or let without ever being occupied and used for the purposes of the trade, it is not a relevant asset.
Newcastle City Council v Royal Newcastle Hospital [1959]
In this case, Lord Denning how to decide if land is “occupied”. The same approach applies to buildings.
“Legal possession is not the same as occupation. Occupation is a matter of fact and only exists where there is sufficient measure of control to prevent strangers from interfering. There must be something actually done on the land, not necessarily on the whole but on part in respect of the whole. No-one would describe a bombed site, or an empty unlocked house as “occupied” by anyone; but everyone would say that a farmer “occupies” the whole of his farm even though he does not set foot on the woodlands within it from one year’s end to the other”.
The case also confirmed that that an owner may “use” land even without physical activity if they keep it in its natural state for a specific purpose.
“An owner can use land by keeping it in its virgin state for his own special purposes. An owner of a powder magazine or a rifle range uses the land he has acquired nearby for the purposes of ensuring safety even though he never sets foot on it. The owner of an island uses it for the purposes of as bird sanctuary even though he does nothing on it, except prevent people building there or disturbing the birds.”
Ownership is not enough
Simply owning the land or building is not enough to meet the test of being occupied and used for the purposes of the trade. To qualify:
there must be actual use for the purposes of the trade
the person must show that they retain control through occupation of the land or buildings
Let properties
The letting of land or buildings on terms that give the tenant exclusive occupation is not normally a relevant asset of the owner for the purposes of the owner’s trade. This is because the tenant, not the owner, is occupying and using the property.
Exceptions
Relief may still be available in the following situations:
land and buildings let to a partnership by an acting partner (see CG60286)
land and buildings let to an individual's family or personal company (see CG60260)
lessors of tied premises (see section ‘Licensed premises owned by brewers’ below)
lessors of furnished premises and caravan sites where the owner provides services in circumstances amounting to trading (see PIM4300)
Furnished holiday lettings
From 6 April 2025 (and 1 April 2025 for Corporation Tax), furnished holiday lettings are no longer treated as a trade. The consequences for roll-over relief are explained at CG60287.
When the owner remains the legal occupier
A claim for relief is not automatically prevented simply because other people also occupy the premises. Relief may still be available where the owner remains the legal occupier. Examples include:
a hotel or guest house, except any part not used exclusively for trade purposes
licensed premises owned and managed by a brewer
a house let to an employee who must live there (and nowhere else) to properly perform their duties (see EIM11300). The employer is likely to remain the legal occupier where the employee occupies the house under a licence. The employer is unlikely to remain the legal occupier where the employee has a tenancy granting exclusive occupation
A farmhouse occupied by the farmer as a private residence is not regarded as occupied only for trade purposes. However, any part used exclusively used for the purposes of the trade may be treated as a separate relevant asset (see CG60292).
Houses provided for directors
A house provided by a company for use as a director’s private residence will not normally be a relevant asset. This is because living in that property (and no other) is unlikely to be essential to the proper or better performance of the director’s duties.
Houses provided for partners
A house provided by a partnership for a partner’s private residence be a relevant asset if either:
the partnership agreement requires the partner to live in that specific house
living in that house is essential to the trade of the partnership
The decision in Anderton v Lamb [1980] confirmed that the tests set out in The Commissioner of Valuation for Northern Ireland v Fermanagh Protestant Board of Education [1969] can apply to partners. In Anderton, the tests were not satisfied on the facts.
Whether occupation is essential to the trade is a question of fact. To meet the relevant tests, the person must show either:
it is essential that the employee lives in that particular house and this is implicitly or explicitly agreed by employer and employee
although the house is not essential, living there enables the better performance of duties and there is an express contractual requirement to occupy it
Options over UK land
The grant of an option over UK land is a disposal of an interest in that land. If the land is a relevant asset, roll-over relief may be claimed in respect of the gain arising on the grant of the option.
This analysis is not affected by section 144 TCGA 1992, which provides special computational rules for options.
Granting an option over another type of relevant asset may also be a disposal of an interest in that asset. This depends on contract law and the nature of the asset. See CG12300P for further guidance.
Licensed premises owned by brewers
Where licensed premises are owned and managed by a brewer, and the brewer remains the legal occupier (for example, a managed house), roll-over relief may be available. Any relief extends to the part of the premises where the manager lives.
Lessors of tied premises (as defined in section 19 of the Income Tax (Trading and Other Income) Act 2005 or section 42 of the Corporation Tax Act 2009) are treated, for the purposes of roll-over relief, as both occupying and using the premises for the purposes of their trade. This includes any part where the tenant resides.