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HMRC internal manual

Capital Gains Manual

Roll-over relief: non-resident person with UK branch/agency or permanent establishment

TCGA92/S159

Persons other than companies, who are not resident or ordinarily resident* in the UK but carry on a trade in the UK through a branch or agency, are liable to Capital Gains Tax on chargeable gains on disposals of certain assets situated in the UK, see CG25500+.

Companies that are not resident in the UK but carry on a trade in the UK through a permanent establishment, are liable to Corporation Tax on chargeable gains on disposals of certain assets situated in the UK, see CG42100+.

The assets liable to UK tax are referred to as ‘chargeable assets’ (TCGA92/S159 (4)). The availability of roll-over relief for gains on qualifying assets (see CG60410) by such persons is restricted.

Where such a person disposes of assets which are chargeable assets in relation to him at the time of disposal, roll-over relief is only available if the replacement assets are also chargeable assets in relation to him immediately after the time when they are acquired.

Subject to certain exceptions, relief is available if the claimant is not resident and not ordinarily resident* in the UK when the disposal of old assets occurs but has become resident or ordinarily resident* in the UK when the acquisition of the new assets occurs.

Exceptions - TCGA92/S159 (5)

The exceptions referred to above are where, immediately after the new assets are acquired:

  • the claimant is dual resident and
  • the new assets are prescribed assets

both as defined in Section 159 (5).

In these circumstances, relief is precluded. This is because the effect of a double taxation relief arrangement is to prevent any UK tax liability arising on gains on disposal of the new assets even though they are situated in the UK and the person is resident in the UK.

For the purposes of Section 159:

  • references to `the old assets’ and `the new assets’ have the same meaning as in Section 152;
  • references to the disposal of the old assets include references to the disposal of an interest in them;
  • references to the acquisition of the new assets include references to the acquisition of an interest in them or to entering into an unconditional contract for the acquisition of them.

A Statutory Residence Test for individuals was introduced for years from 6/4/2013.

*For 2013/14 and later years the ordinary residence test no longer applies.

Guidance on the Statutory Residence Test can be found in the RDR3 Guidance Note: Statutory Residence Test (SRT).