CG60310 - Reliefs: replacement of business assets (roll-over relief): obtaining relief
Declaration for Provisional Relief
Claim for relief: Time Limit and Form of Claim
Declaration for Provisional Relief
Section 153A of the Taxation of Chargeable Gains Act (TCGA) 1992 provides a mechanism for a person who has made a disposal of a qualifying asset to obtain provisional roll-over relief before they acquire new assets.
There is no claim involved in obtaining provisional relief under section 153A TCGA 1992. It is obtained upon a declaration, in a return (or amended return), of an intention to reinvest in new qualifying assets within the statutory time limit. One or more claims for substantive relief will need to be made under section 152 TCGA 1992 or section 153 TCGA 1992 once the assets are acquired.
When a declaration is made, section 152 TCGA 1992 or section 153 TCGA 1992 is treated as applying so as to give the relief. At this stage the conditions for relief set out in section 152 TCGA 1992, including the reinvestment condition in section 152(3) TCGA 1992, are not to be considered or tested. The conditions only become relevant when the replacement assets are acquired and a substantive claim under section 152 TCGA 1992 or section 153 TCGA 1992 is made.
There is no specified form that must be used in order to make the declaration. For persons other than companies, an optional form on which the declaration can be made has been provided in Helpsheet 290. The declaration may however be made in any form the customer chooses provided that it is attached to the return for the year in which the old asset was disposed of and identifies the
- customer and their Unique Taxpayer Reference
- old assets which have been disposed of
- amount received for each asset
- date of disposal for each asset
- amount of consideration received from the disposal of each old asset that is to be applied in acquiring new assets
- amount of provisional relief due – this is the amount of the gain being deferred
The customer can then complete their Self Assessment tax return as if there had been an actual acquisition of new assets for the amount specified. The specified amount can only be increased by amending the return. When the period available for amendment has expired, the specified amount can only be withdrawn, wholly or partially, at which point an assessment should be issued to give effect to the withdrawal.
The amount of gain which can be
deferred, temporarily, under a declaration for provisional relief is the amount
that would have been deferred if a new asset had actually been acquired costing
an amount equal to that whole or part of the proceeds on which the declaration
has been made.
Whilst provisional relief is in effect, tax is not payable in respect of the
gain deferred. Under section
153A(3) TCGA 1992, the declaration will cease to have effect when any of
the three circumstances listed below occurs:
- the customer makes a claim to roll-over relief to supersede the declaration
- the customer withdraws their declaration as they no longer have an intention to reinvest
- if neither of the two points above have taken place, the declaration and therefore the relief will expire on the ‘relevant day’, which is defined below
If the customer makes a claim to roll-over relief to supersede the declaration, the provisional relief becomes substantive relief under section 152 or section 153 TCGA 1992 and no assessment is required to the extent that the gain is relieved on that basis. An assessment should not be made where a satisfactory claim to roll-over relief has been made, even if the correctness of that claim has not yet been established. Satisfactory claims are explained below.
Note that in the case of partial reinvestment, a declaration for provisional relief can be viewed as having been partially superseded by a claim to roll-over relief (to the extent that there has been sufficient reinvestment). The balance is treated as an unfulfilled declaration that expires on the ‘relevant day’ as appropriate, unless withdrawn earlier and therefore falling within either the second or the third bullet points above.
If the customer withdraws their declaration of intent, or the declaration expires and no claim has been made, an assessment must be made to bring the gain from the initial disposal of the old asset into charge.
The decision in The Commissioners for HM Revenue and Customs v Benham (Specialist Cars) Limited [2017] UKUT 0389 (TCC) confirmed that this gain is correctly brought into charge by means of a discovery assessment, although section 153A(4) TCGA 1992 provides that if the usual time limits for making such an assessment have passed, the gain can still be brought into charge by the making of an assessment or otherwise.
Section 153A(5) TCGA 1992 defines the ‘relevant day’ as:
- for persons other than companies, the third anniversary of the 31 January next following the tax year in which the disposal of the old assets took place
- for companies, the fourth anniversary of the last day of the accounting period in which the disposal of the old assets took place
Example 1
Joe sold his trade premises on 10
March 2022 and made a gain. He made a declaration that he intends to reinvest
the whole of the consideration in new assets. The relief given provisionally in
respect of this disposal will expire on 31 January 2026 if the declaration has
not been withdrawn or replaced with a claim to roll-over relief by this date.
Example 2
A company, Joe Ltd, sold premises in its accounting period ending 31 March 2022 and made a gain. The company made a declaration that it intends to reinvest the whole of the consideration. The relief given provisionally in respect of this disposal will expire on 31 March 2026 if the declaration has not been withdrawn or replaced with a claim to roll-over relief by this date.
If the customer dies while provisional relief is in place you should write to his or her personal representatives and ask them to withdraw the declaration. You should consider explaining that interest will continue to run if they do not. If the declaration is not withdrawn, you cannot raise an assessment until the relevant day. The assessment is then raised on the personal representatives. For further information about the time limits applying to assessments on the personal representatives see CH54200.
If HMRC staff raise an assessment because the relevant day has passed without a reinvestment taking place, the customer may sometimes make a postponement application on the basis that reinvestment will take place shortly. HMRC staff should always deny such applications.
Claim for relief: Time Limit and Form of Claim
A claim must be made to obtain substantive roll-over relief under section 152 TCGA 1992 or section 153 TCGA 1992.
The time limit for making a claim to roll-over relief is:
- for persons other than companies, 4 years from the end of the year of assessment to which the claim relates, see SACM3035
- for companies, 4 years from the end of the accounting period to which the claim relates, see CTM90610
The time limit for claiming relief begins with the end of the tax year or accounting period in which the later of the following took place:
- the disposal of the old assets
- the acquisition of the new assets
Example 3
If a disposal is made by a sole
trader in the tax year 2019 to 2020 and the consideration received is
reinvested in replacement business assets in the tax year 2021 to 2022 the time
limit for a claim to roll-over relief is 5 April 2026.
Example 4
If a disposal is made by a company in the accounting period ended 30 June 2022 and a claim to roll-over relief is made in respect of a reinvestment in the accounting period ended 30 June 2021, the time limit for a claim is 30 June 2026.
A claim to relief is not prevented by the finality of an assessment on chargeable gains.
There is no specified form that must be used in order to make a claim to roll-over relief. For persons other than companies, there is an optional form on which the claim can be made, and this has been provided in Helpsheet 290. However, the claim may be made in any form the customer chooses provided that it is made in writing and identifies the:
- claimant and their Unique Customer Reference
- old assets which have been disposed of
- amount received for each asset
- date of disposal for each asset
- new assets which have been acquired
- cost of each new asset
- date of acquisition for each new asset, or the date on which unconditional contracts for the acquisition of each of those assets were entered into
- amount of consideration received from the disposal of each old asset that has been used to acquire each new asset
- amount of relief due - this is the amount of the gain being deferred
Wherever possible, the claim should be attached to the tax return to which it relates – that is the one for the year of disposal, or an amendment to that return. SACM3030 contains guidance to help you decide if a claim is made in or outside of a return.
If a claim is sent outside of a tax return, the claimant, or the person claiming on their behalf (see SACM3010), must also include a signed declaration stating that the particulars given in the claim are correct and complete to the best of their knowledge and belief.
The claim will only be complete and therefore satisfactory if it contains all the specified information and declaration above. SACM10010 provides guidance on unsatisfactory claims. If HMRC staff receive an attempted claim outside a return, but the claim does not include all the required information they should write to the claimant explaining that they have not made a claim and set out the information which is needed to make a satisfactory claim.
For example, if a claim received outside a return does not include a signed declaration by the claimant, or the amount of relief being claimed, or details of the new assets it will not be a satisfactory claim. If a claim is not satisfactory, it cannot be given effect to and an enquiry cannot be carried out into it.
See CG13700P for further information about making claims.