CG60292 - Reliefs: Replacement of Business Assets (Roll-over Relief): Computation of Relief: Partial Trade Use
Partial Use in Terms of Space
Partial Use in Terms of Time
Meaning of ‘Period of Ownership’
Partial Use in Terms of Space
The list of assets in TCGA92/S155 that may qualify for roll-over relief includes in Class 1, Head A, `any building or part of a building’. This implies that a part of a building may be a separate asset for the purpose of the relief.
This implication is reinforced by TCGA92/S152(6), which applies where a part of a building or structure is used for the purpose of a trade to treat that part as if it were a separate asset. This process applies to both ‘old’ and ‘new’ assets. It follows that where a part of a new building or structure is used exclusively for the purpose of a trade that part can be treated for roll-over relief as if it were a separate asset that qualifies for roll-over relief, with the remainder of the building not so qualifying. The cost of acquisition of the new building or structure is to be apportioned in accordance with TCGA92/S152(11), i.e. on a just and reasonable basis.
There is no equivalent apportionment provision for the other classes of assets in TCGA92/S155. Such assets must be used and used only for the purpose of the trade for relief to be due.
For example, Clive disposes of an asset in June 2017 for £160,000, realising a gain of £50,000. In March 2019 he acquires a new building for £280,000. Half of the new building is to be let while half is to be used in his trade. It is agreed that £140,000 of the cost should be apportioned to each part. Clive can roll-over £30,000 of the gain leaving a chargeable gain of £20,000, a sum equal to the consideration not reinvested in the acquisition of the new qualifying asset (see CG60291), in 2017-18.
Partial Use in Terms of Time
Under TCGA92/S152(7), an apportionment on a just and reasonable basis (TCGA92/S152(11)) should be made where the old assets were used for qualifying purposes during part only of the period of ownership.
On 6 April 2009, Mike buys for £150,000 a building which he uses for the purposes of his trade, except for the top floor which is occupied by a sitting tenant under a lease. On a `just and reasonable’ apportionment, the part which Mike occupies for the purposes of his trade is worth four-fifths of the whole.
On 5 April 2011, the lease expires and from 6 April 2011, Mike occupies the whole building for the purposes of his trade.
On 5 April 2017 he ceases to use the building for the purpose of the trade (which continues elsewhere) and from 6 April 20107, he lets the whole building.
On 5 April 2019, he obtains vacant possession and he sells the building for £300,000 and uses the whole proceeds to buy a new building for the purposes of the trade.
| Computation | - | - | £ |
|---|---|---|---|
| - | Disposal proceeds | - | 300,000 |
| Less | Cost | - | 150,000 |
| - | - | GAIN | 150,000 |
Four-fifths of the building was occupied and used for the purposes of the trade for eight out of ten years of ownership while one-fifth of the building was so occupied for six years out of the ten years of ownership. A just and reasonable proportion of the building that has been used for trade purposes throughout Mike’s period of ownership could therefore be calculated as:
(4/5 x 8/10) + (1/5 x 6/10) = 19/25
Relief due is therefore calculated as 19/25 of £150,000, being £114,000, with a chargeable gain of £36,000 also arising.
Meaning of ‘Period of Ownership’
The period of ownership of an asset for roll-over relief purposes is the period of beneficial ownership and possession. This period may be different from the period between the date on which a person is treated as acquiring an asset for CGT and the date on which they are treated as having disposed of it. For example, TCGA92/S28 treats an asset acquired under an unconditional contract as acquired on the date of the contract, although beneficial ownership may not be obtained until completion. The period of ownership for roll-over relief begins when beneficial ownership is obtained.
Where you need to calculate any restriction to relief because of partial trade use you should do so by reference to the period in which the trader had beneficial ownership and possession of the asset. In many cases the restriction computed by using the period of beneficial ownership will be very similar to that computed by reference to the period over which the gain is treated as accruing and you should not pursue trivial adjustments.
Under TCGA92/S152(9), ‘period of ownership’ specifically does not include any time before 31 March 1982.