Rollover Relief

Key facts

You must reinvest in a new qualifying asset within 1 year before to 3 years after the disposal.
The gain is deferred by reducing the base cost of the replacement asset.
Both the old and new assets must fall within the same qualifying asset classes.
Available to individuals, partnerships, and companies carrying on a trade.
Partial relief is available if not all proceeds are reinvested.

What Is Rollover Relief?

Business Asset Rollover Relief (sometimes called “replacement of business assets relief”) allows you to defer Capital Gains Tax when you dispose of a qualifying business asset and reinvest the proceeds in a new qualifying business asset.^[1]

The gain from the old asset is “rolled over” into the new asset by reducing its base cost. This means no CGT is payable at the time of disposal, but the deferred gain will crystallise when the replacement asset is eventually sold (unless further rollover relief is claimed).

Time Limits for Reinvestment

To qualify for rollover relief, the replacement asset must be acquired within the following time window:^[2]

1 year before the disposal of the old asset, or
3 years after the disposal of the old asset

HMRC may extend these time limits in exceptional circumstances, but this is discretionary and not commonly granted.

Tip: You can make a provisional rollover relief claim if you intend to reinvest but have not yet done so. This is useful when filing your tax return before the 3-year reinvestment window has closed. If you do not reinvest within the time limit, the provisional claim is withdrawn and the gain becomes taxable.

Qualifying Asset Classes

Both the old asset and the replacement asset must fall within the qualifying asset classes set out in s.155 TCGA 1992. The main classes are:^[2]

Class	Description
1	Land and buildings (including parts of buildings) occupied and used for the trade
2	Fixed plant and machinery not forming part of a building
3	Ships, aircraft, and hovercraft
4	Satellites, space stations, and spacecraft
5	Goodwill (for individuals and partnerships only — not companies since 2002)
6	Milk quotas and potato quotas (historical)
7	Ewe and suckler cow premium quotas (historical)
8	Fish quotas
9	Lloyd’s syndicate capacities

The old and new assets do not need to be in the same class. You can sell land (class 1) and reinvest in fixed plant (class 2), for example.

How Rollover Relief Works

The gain on the old asset is deferred by reducing the base cost of the new asset. Here is an example:

Step	Amount
Sale proceeds of old premises	£600,000
Original cost of old premises	£200,000
Gain on disposal	£400,000
Cost of new premises	£700,000
Gain rolled over	£400,000
Base cost of new premises for CGT	£700,000 − £400,000 = £300,000

No CGT is payable now. If the new premises are later sold for £900,000, the gain will be £600,000 (£900,000 − £300,000), incorporating the deferred £400,000.

Partial Reinvestment

If you reinvest less than the full sale proceeds, you can still claim partial rollover relief. The amount not reinvested is immediately chargeable, and the remainder of the gain is rolled over:^[1]

Step	Amount
Sale proceeds	£600,000
Gain	£400,000
Cost of replacement asset	£500,000
Amount not reinvested	£100,000
Gain chargeable now (lower of gain and amount not reinvested)	£100,000
Gain rolled over	£300,000

Important: The amount taxable immediately is the lower of (a) the gain and (b) the amount of proceeds not reinvested. If the amount not reinvested exceeds the gain, the entire gain is chargeable and no rollover relief is available.

Key Conditions

Both the old and new assets must be used for the purposes of a trade carried on by the claimant
The old asset must have been used in the trade throughout the period of ownership (partial use restricts the relief)
The new asset must be brought into immediate use in the trade
For land and buildings, any part not used for the trade (e.g. let to a third party) is excluded from the relief

Rollover into Depreciating Assets

If the replacement asset is a depreciating asset (a wasting asset or an asset with a predictable useful life of 60 years or less, such as a lease), the gain is not deducted from the replacement asset’s base cost. Instead, the gain is “frozen” and becomes chargeable on the earliest of:^[2]

The depreciating asset being sold
The depreciating asset ceasing to be used in the trade
10 years from the date of acquisition of the depreciating asset

The frozen gain can be “unfrozen” and rolled into a non-depreciating asset if one is acquired before the gain crystallises.

Frequently Asked Questions

What happens if I reinvest less than the full sale proceeds?

You can still claim partial rollover relief, but the amount not reinvested is immediately chargeable to CGT. For example, if you sell an asset for £500,000 (with a gain of £200,000) and reinvest only £400,000, the un-reinvested £100,000 is chargeable immediately, and the remaining £100,000 of gain is rolled over.

Can I roll over into a different class of asset?

Yes. You do not need to reinvest in the same type of asset — you can sell land and buy plant and machinery, for example. However, both the old and new assets must fall within the list of qualifying asset classes defined in s.155 TCGA 1992.

Is rollover relief available for investment properties?

No. The assets must be used in a trade carried on by the person making the claim. Buy-to-let and investment properties are not qualifying assets because letting is not a trade for rollover relief purposes.

Can a company claim rollover relief?

Yes. Rollover relief is available to companies as well as individuals and partnerships. The company must use both the old and new assets for the purposes of its trade.

Sources

Business Asset Rollover Relief — GOV.UK
Capital Gains Manual: rollover relief — HMRC
HS290 Business Asset Rollover Relief — HMRC