CG60290 - Reliefs: Replacement of Business Assets (Roll-over Relief): Computation of Relief: Basic Principle

Where the new assets are qualifying assets, though not depreciating assets (for which see CG60285), the claimant’s chargeable gains are to be determined as if:

  • the disposal proceeds of the old assets exactly equal the allowable expenditure on them (i.e. the disposal of the old assets gives rise to neither gain nor loss); and
  • the acquisition cost of the new assets is reduced by the same amount as the sum by which the consideration for disposal of the old assets is reduced

The effect is that the chargeable gain on the old assets is not taxed when realised. Instead, it is deducted from the cost of acquisition of the new assets. It will increase the chargeable gain accruing when there is a disposal of the new assets, subject to any claim to roll-over relief which may then be made or to any other relief due. For guidance on part-disposals see CG12730+.

As an example, in May 2010 Will buys for £100,000 (including expenses of purchase) a freehold shop which he uses and occupies exclusively for trade purposes until May 2018, when it is sold for £180,000 (net of expenses of sale). The chargeable gain on the disposal is (£180,000 - £100,000) £80,000. Also in May 2018, Will acquires larger premises at a cost of £250,000 (including expenses of purchase) and moves the trade to the new shop. If a claim to relief under TCGA92/S152 is made, the sale of the first shop should be dealt with as if the disposal consideration were reduced by £80,000 to £100,000 (that is, the amount which produces neither gain nor loss). The cost of the new shop should also be reduced by £80,000 to £170,000.

In May 2019 Will sells the second shop for £300,000 (incurring £5,000 expenses of sale) and takes up employment. The chargeable gain on disposal of the second shop is:

- - - £
- Disposal proceeds - 300,000
Less Expenses of sale - 5,000
- Net disposal proceeds - 295,000
- - £ -
Less Cost (including expenses of purchase) 250,000 -
- - Roll-over relief allowed 80,000 170,000
- CHARGEABLE GAIN - 125,000