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HMRC internal manual

Capital Gains Manual

Roll-over relief: asset used for purposes of office/employment

SP5/86

Roll-over relief is available for assets used only for the purposes of the claimant’s office or employment. Relief should not be denied because the asset is also used by the employer for the purposes of the employer’s trade. The sole use condition should be regarded as satisfied unless the asset is used for some purpose alien to the office or employment.

For example, if an employee provides land which is used generally for the purposes of farming carried on by his employer and the employee is engaged as a farmworker, the land may be regarded as used only for the purposes of the employment. If, however the land is used for the purposes of, for example, motorbike scrambling, that would be use other than for the purposes of the employment of farmworker. As a result, the asset would fail the sole use test. The focal point is what the employee is engaged to do, for example to farm, rather than assets which must be used exclusively in the course of the employment such as the employee’s own aircraft used only for the purposes of his employment as a crop sprayer.

Where the asset is land or buildings, it must also be occupied only for the purposes of the office or employment. Land and buildings can be occupied simultaneously by more than one person. Where occupation by the employer is under a rent-free licence and no other consideration is given for the occupation, it may be accepted that the employee remains in occupation as owner. If the employer pays rent or gives any other consideration for the occupation or occupies the premises under a lease or tenancy such that the employer has the right to occupy to the exclusion of all others, the employee will have given up the legal right of immediate occupation as owner. The employee may continue to enter the premises but he can only do so with the permission of the employer. In those circumstances occupation by the employee will be as licensee of the employer and not as owner of the land. Thus, the occupation test will not be satisfied. (But see CG60990+ for other circumstances in which the owner of the premises remains the legal occupier).

A director who works full-time in the retailing business of a family company owns the retail premises from which the company trades. The company has no lease or tenancy of the premises, gives no rent or other consideration for the occupation and has no right to exclude the owner from the premises. It may be accepted that the director uses and occupies the premises only for the purposes of his office. On the other hand, mere ownership of land or buildings is not sufficient.

Assets used by employees which are capable of satisfying the user test include goodwill, for example, the `insurance books’ held by insurance salesmen, see CG69100, and the right to tips enjoyed by employees in hotel and other trades.