Roll-over relief: form of relief
Where the new assets are qualifying assets, though not depreciating assets (see CG60370+ for depreciating assets), the claimant’s chargeable gains are to be determined as if:-
- the disposal proceeds of the old assets exactly equal the allowable expenditure on them including indexation allowance, see CG17200+. (The disposal of the old assets thus gives rise to neither gain nor loss); and
- the acquisition cost of the new assets is reduced by the same amount as the sum by which the consideration for disposal of the old assets is reduced.
NOTE. If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998.
Companies and other concerns within the charge to Corporation Tax are not affected by these changes. For indexation allowance see CG17207+ and for taper relief see CG17895+.
The effect is that the chargeable gain on the old assets is not taxed when realised. Instead, it is deducted from the cost of acquisition of the new assets. It will increase the chargeable gain accruing when there is a disposal of the new assets, subject to any claim to roll-over relief which may then be made or to any other relief due. For guidance on part-disposals see CG12730+.
In May 2000 a trader buys for £100,000 (including expenses of purchase) a freehold shop which he uses and occupies exclusively for trade purposes until May 2008 when it is sold for £180,000 (net of expenses of sale). The chargeable gain on the disposal is (£180,000 - £100,000) £80,000. Also in May 2008, the trader acquires larger premises at a cost of £250,000 (including expenses of purchase) and moves the trade to the new shop. If a claim to relief under TCGA92/S152 is made, the sale of the first shop should be dealt with as if the disposal consideration were reduced by £80,000 to £100,000 (that is, the amount which produces neither gain nor loss). The cost of the new shop should also be reduced by £80,000 to £170,000.
In May 2009 the trader sells the second shop for £300,000 (incurring £5,000 expenses of sale) and takes up employment. The chargeable gain on disposal of the second shop is:-
|LESS||Expenses of sale||5,000|
|net disposal proceeds||295,000|
|LESS||Cost (including expenses of purchase)||250,000|
|- Roll-over relief allowed||80,000||170,000|