Roll-over relief: depreciating assets: partial re-investment
If only part of the proceeds of the disposal of the old asset (No 1) is applied in the acquisition of a depreciating asset (No 2) only part of the gain may be held over, see CG60400.
If a new non-depreciating asset is acquired, the amount of the gain that can be rolled over cannot exceed the amount of the gain that was held over on the acquisition of the depreciating asset.
In March 2005 a trader sells a freehold shop for £200,000, realising a gain of £60,000. In 2007 he acquires an item of fixed machinery for £180,000 and claims relief. The held over gain is £40,000 (the amount of the gain that has been re-invested). The chargeable gain in 2004-05 is £20,000.
In 2009, while the machinery is still being used in the trade, he acquires a further freehold shop for £260,000 and makes a claim to apply Section 154 (4). The gain that can be rolled over is limited to £40,000. The cost of the new freehold shop is reduced to £220,000 and the chargeable gain in 2004-05 is not affected.