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HMRC internal manual

Capital Gains Manual

Roll-over relief: on the acquisition

TCGA92/S152 (1) requires the new asset to be `on the acquisition ….. taken into use’ for the purpose of the trade etc. In the High Court decision in Campbell Connelly & Co Ltd v Barnett (66TC380) Knox J. commented that

`Although it leads to difficulties in reconciling TCGA92/S27 [now TCGA92/S28] and Section 115 [now Section 152], it seems to me that there is enough internal evidence in Section 115 to lead to the conclusion that the acquisitions being aimed at are completed acquisitions, not ones which still lie in contract.’

The asset must be taken into use at the time that any contracts are completed by conveyance or delivery and possession has been obtained.

If the asset is ready for use when possession is obtained, it must be taken into qualifying use without delay. The asset may, however, need minor alterations or adaptations or the claimant may need, for example, to obtain stock or to engage staff before the asset can be taken into use. Relief should not be denied solely on the grounds that the asset has not been brought into use as soon as it is acquired, provided that it is brought into use as soon as is practicable after the acquisition and without unnecessary delay.

The question is to be decided on the facts and circumstances of the case taking account of the nature of the trade and the asset concerned. In most cases, it is expected the interval will be short.

For example, taking over a public house but not opening until after the next licensing court may be acceptable but taking over a hotel as a going concern in May but not opening until October would be unacceptable (unless the hotel is, for example, in a ski resort and the main season is in the winter).

The interval may be longer but still acceptable if the trade is a seasonal one. If the asset is acquired after the end of the season but is not taken into use until the beginning of the new season, the delay may be acceptable. Examples might include an aircraft used for crop spraying or an ice cream kiosk in a seaside resort.

Milton v Chivers (SpC 57/95)

The decision of the Special Commissioners in Milton v Chivers (SpC 57/95) is a useful example. At the time the Special Commissioners decisions were not legally binding precedent, but it illustrates our view that the acquisition and the taking into use must be reasonably proximate to one another. The asset may not be capable of being taken into use immediately but the claimant must not be dilatory.