Roll Over Relief

1) Disposal Proceeds x
Less Allowable Costs (x)
Gain X £
Rollover Relief (x)
Chargeable Gain £

2) Base Cost of the new Asset
Acquisition Cost x
Less Rollover relief (Above) (x)
Base Cost £

3) Disposal Proceeds of the new asset x
Less Base Cost (x)
Chargeable Gain for Asset 2 £

Rollover Relief – Make sure when calculating the Rollover relief you consider 1) How much of the asset was used for business purposes. If say the Gain for a disposal of a factory was £100,000 but the factory was used only 75% of the time for business purposes that rollover relief would be £75,000. Hence £25,000 of the gain is chargeable on disposal. 2) Whether the disposal proceeds were fully reinvested – so lets say asset one was disposed for £300,000, however, asset 2 was only acquired for £280,000 then the individual hasn’t fully reinvested his proceeds and hence £20,000 of the gain becomes chargeable leaving rollover relief of £80,000 on the chargeable gain calculated 3) you finally need to consider if the asset disposed of is a depreciating asset. If it is a depreciating asset then you do not calculate a base cost. The relief is frozen (which would be 100% relief unless any of the above contingencies have applied) until one of the following occurs 1) 10 years, 2) replacement asset is sold 3) replacement asset is no longer used 4) a non depreciating asset is bought – when one of these occurs you calculate the gain as normal and then ADD the relief which was frozen to arrive at a chargeable gain.

Holdover relief when you gift an asset is very similar. Holdover relief is affected by the business use but also by any consideration given in excess of the original cost of the asset. Therefore if I acquired an asset for £100,000, Gifted it when its market value was £250,000 then I have a gain of £150,000. However I also received some consideration for the gift of £130,000. Therefore I am not entitled to 100% holdover relief. £30,000 (i.e. £130,000 – £100,000) is chargeable now.

Rollover relief is the only relief for companies unlike for individuals (above). Rollover relief for companies is calculated in the same way but you must apply the relief to the indexed gain. Also Rollover relief does not apply to Goodwill for a company.

I hope this helps you