Business asset rollover relief

Definition

Business asset rollover relief is a tax relief in the UK that allows business owners to defer paying capital gains tax (CGT) on the sale of certain business assets by reinvesting the proceeds into new assets.  

What is the business asset rollover relief?

The business asset rollover relief helps to support businesses by reducing the immediate tax burden, thereby freeing up capital for further investment and expansion. This relief is intended to encourage investment and growth within businesses by postponing the tax liability related to the disposal of assets.

When a business owner sells an asset, such as machinery or commercial property, and reinvests the sale proceeds into new qualifying assets, business asset rollover relief allows them to defer the CGT that would normally arise from the sale. Instead of paying the tax immediately, the relief allows the gains to be rolled over into the new assets, effectively postponing the tax liability until the new assets are eventually sold.

To qualify for business asset rollover relief, the new assets must be used in the same trade or business as the asset being replaced, and the reinvestment must occur within a specified period, typically within three years of the sale. Additionally, both the old and new assets must meet certain criteria set by HM Revenue and Customs (HMRC).

Example of a business asset rollover relief

A manufacturing company sells an old piece of machinery for £100,000, generating a capital gain. Instead of paying capital gains tax on this amount, the company reinvests the entire £100,000 into new, advanced machinery for its production line. 

By applying business asset rollover relief, the company defers the capital gains tax liability until it sells the new machinery. This allows the company to use the full proceeds from the sale for further investment in its operations without the immediate tax burden.