Business Asset Rollover Relief: what it is and why HMRC is asking questions

Business Asset Rollover Relief can defer Capital Gains Tax (CGT) due on the disposal of business assets. It is currently very much on HMRC’s radar.

Broadly speaking, Rollover Relief is available when the proceeds of disposal are reinvested in a new asset, subject to certain conditions. It works by rolling the gain over into the cost of the new asset, and reducing its base cost. This pushes tax on the gain into the future, to crystallise when the new assets (or their successors) are eventually disposed of.

Overview of rules

• Relief is available to persons carrying on a trade: this includes sole traders, partners, and companies.
• Both the old asset and the new must be ‘qualifying’ assets used in a trade.
• Time limits apply for reinvestment in the new asset.
• Time limits apply to making a claim for relief.
• A provisional claim can be made where new assets are yet to be acquired.
• Relief is restricted where disposal proceeds are not fully reinvested. It can also be restricted if the old asset was only used for the business for part of the period of ownership.
• Slightly different rules apply for depreciating assets.

A qualifying asset is an asset used in the trade. Assets must fall into specific categories: these include fixed plant or machinery, interests in land or buildings, and certain farming assets, such as milk quotas. The list is not exhaustive, and there is no requirement for the old and new assets to be in the same category.

There is a specific window to reinvest. Generally, the new asset must be acquired, or an unconditional contract entered into in the 12 months before, or 36 months after the old assets are disposed of. Note also that new assets must usually be brought into use in the trade at once.

Claims and provisional claims

Final claims can be made within four years after the end of the tax year/company accounting period in which the later of either the disposal of the old assets; or the acquisition of the new assets, took place.

A provisional claim can be made if you mean to reinvest, but have still to acquire a new asset when the tax return notifying the gain needs to be filed. This provisional claim is then superseded by a valid claim for Rollover Relief once the new asset is acquired. For individuals, provisional relief is given for a maximum of three years from 31 January following the tax year of disposal. Problems can arise if you make a provisional claim, and then fail to acquire new assets, and make a claim. Tax deferred becomes payable, with interest running from the original due date to the date of payment.

HMRC letters highlight pitfalls

HMRC is currently writing to some taxpayers who made a provisional claim on the sale of assets in 2022/23, but HMRC’s records suggest they have yet to submit a valid Rollover Relief claim to replace it. The clock is running, and HMRC advises that action is needed by 31 January 2027, when provisional relief expires.



Here to help

Choices in this area can be complex. The interaction with Business Asset Disposal Relief, for example, is important to consider. We can assist with specific advice to optimise your decisions around disposals and investments. Do please contact us.