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HMRC internal manual

Capital Gains Manual

Roll-over relief: depreciating assets: acquisition of further assets

TCGA92/S154 (4), (5) & (6)

Where all the proceeds of the disposal of the old asset (No 1) are applied in the acquisition of a depreciating asset (No2) and:-

  • the gain on asset No 1 is held over under CG60360,


  • a further non-depreciating asset (No 3) is acquired,


  • the acquisition is made before the chargeable occasion mentioned in CG60360,

the taxpayer may make a claim under TCGA92/S152 to roll over the chargeable gain on asset No 1 into the cost of acquisition of asset No 3. If such a claim is made, the claim which applied to asset No 2 (the depreciating asset) is treated as withdrawn and asset No 3 is treated as acquired within the statutory time limit, see CG60620.

Note that S154 does not extend the time limit for making a claim, so the new claim must be made within the normal time limit – see CG60600.

Where only part of the proceeds are applied in the acquisition of a depreciating asset, see CG60380.

If only part of the held-over gain can be set against the cost of the new non-depreciating asset (that is, because TCGA92/S153 (1) applies, see CG60400), the held-over gain can be split. The part which is allowable under Section 153 (1) can be deducted from the new non-depreciating asset. The remainder can continue to be held-over until the chargeable occasion mentioned in CG60360.

In March 2000 a trader buys for £150,000 (including expenses of purchase) a freehold shop which she uses and occupies exclusively for trade purposes until March 2005 when it is sold for £298,000 (net of expenses of sale). The chargeable gain on the disposal is £298,000 - £150,000 = £148,000. Also in March 2005, the trader acquires a 50 year lease of a larger shop at a cost of £320,000 (including expenses of purchase) moves the trade to the new premises and claims roll-over relief. In March 2007, the trader assigns the lease for £350,000.

The sale of the first shop should be dealt with as if the disposal consideration were reduced by £148,000 to £150,000. Because the new asset is a depreciating asset, the gain of £148,000 is held-over. On assignment of the lease, the chargeable gain on the second shop is computed in the normal way, see CG71140+. In addition, the held-over gain of £148,000 is assessed as accruing at the date of the assignment.

However, if in March 2009 the trader buys the freehold of a third shop for £340,000 (including expenses of purchase) and so claims, the cost of that shop should be reduced by £148,000 to £192,000 and the held-over gain will not become chargeable in 2008-09.

If the third shop cost £260,000, that cost should be reduced by £110,000 (that is, £148,000 - (£298,000 - £260,000)). The balance of the held-over gain, that is £38,000, is assessable in 2008-09. See CG60400 where partial reinvestment occurs.

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+.