CG60300 - Reliefs: Replacement of Business Assets (Roll-over Relief): Time Limit for Reinvestment
Impact of Compulsory Acquisition on Time Limits – SP D6
Mandatory Referrals to CG Technical
Specified Time Limits
The general rule under TCGA92/S152(3) is that the new asset must be acquired, or an unconditional contract for the acquisition of new assets must be entered into, in the period beginning twelve months prior to and ending three years after the date of disposal of the old asset.
The Board of HMRC have the power to extend these time limits and the approach taken in exercising this discretion is set out below.
Unconditional Contracts
TCGA92/S152 (4) provides for relief to be allowed on a provisional basis when an unconditional contract for the acquisition of qualifying new assets is entered into. Provisional relief should be reviewed in the light of the full facts (for example the use to which the asset is put on the acquisition). All necessary adjustments by making or amending assessments or by repayment or discharge of tax may then be made without regard to normal time limits.
In addition to provisional relief when there has been an unconditional contract you should be aware of the possibility of provisional relief before any contract for acquisition has been entered into, see CG60310.
Impact of Compulsory Acquisition on Time Limits – SP D6
New Town Corporations and similar authorities may purchase land for development long before the work begins. In the interval, the land may be leased or licensed back to the previous owner. In that situation, the Board will be prepared, so long as there is clear continuing intention that the sale proceeds will be used to acquire new qualifying assets, to extend the time limit for reinvesting the sale proceeds to a date three years after the land ceased to be used by the trader for his trade.
Note though that an assessment should be made on the gain on disposal on the earliest of the following occasions:
- as soon as the condition of intention to reinvest in qualifying assets ceases to be satisfied
- when the land ceases to be used for the trade of the claimant, including on death of the trader or complete cessation of the trade
- in good time before the expiry of the relevant assessing time limit
Board’s Discretion
It is important to note that an extension cannot be granted in advance of the old asset being disposed of, the new asset being acquired and all other conditions of the relief being satisfied. The Board has no discretion to extend the effect of a provisional claim to prevent a gain coming into charge, see CG60310.
The Board’s discretion to extend the time limits for reinvestment has been delegated in certain circumstances to any Grade 7 CG specialist within compliance or customer service directorates. Such a specialist may grant an extension:
- in the case of land disposed of under a compulsory purchase order or under threat of such an order, provided the conditions set out at SP D6 above are satisfied;
or
- where the new asset was acquired not more than three years before or six years after the disposal of the old asset and there are acceptable reasons for the delay
For example, where the acquisition preceded the disposal, acceptable reasons might include:
- the threat of compulsory acquisition of the old asset;
- difficulty in disposing of the old asset;
- the acquisition of land with the intention of erecting a building on it;
- the need to have new premises functioning before the old premises can be vacated.
An extension of the time limit in Section 152 (3) is permitted where the claimant can demonstrate that
- they had a firm intention to acquire replacement assets within the time limit
but
- they were prevented by some fact or circumstance beyond their control from acquiring the replacement assets, or any assets, within the time limit
and
- acted as soon as they reasonably could after ceasing to be so prevented.
It is a question of fact and degree and each case is considered on its own merits. Examples of circumstances outside the claimant's control might include death or serious illness of a vital party at a crucial time, unsettled disputes or litigation, genuine difficulty in establishing good title or in finding suitable replacement assets or delay in receipt of disposal consideration.
A mere change of intention at a late stage or a shortage of funds arising out of application of disposal consideration to some purpose other than the acquisition of new qualifying assets will not normally be regarded as circumstances beyond the claimant's control.
Mandatory Referrals to CG Technical
If a request for an extension is received and the new asset was acquired outside of the period beginning three years prior to and six years after the disposal of the old asset, the extension request must instead be considered by Capital Gains Technical Team on behalf of the Commissioners.
Referrals are also mandatory where the reviewing CG specialist is of the view that the extension should be refused. The First-tier Tribunal does not have any power to set aside a decision not to extend the time limit which has been made by the Board.