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Capital Gains Tax Rollover Relief

By Ensors Team
25th Mar 2022

As rural businesses continue to evolve on the back of changing Government support payments and the ever changing economic landscape, we will continue to see continued property sales as rural businesses restructure for the future.   On top of this developers still seem keen to acquire land to meet the country’s increased new housing needs.

As with any significant financial transactions, property disposals should always be preceded with some sound taxation advice for a full understanding of the tax consequences of disposal  and to identify potential mitigation against liabilities.

Gains in value of disposed properties are taxed under Capital Gains Tax (CGT) and the default rate for most will be 20% of the taxable gain in value, although residential properties, that do not qualify for Private Residence Relief, are taxed at the higher 28% rate with the added requirement that the tax needs to be settled within 60 days of completion of the sale.

A common mitigation will be Business Asset Rollover Relief where the proceeds from the sale of property used in a trade of the vendor is reinvested in new property that is also to be used in the trade of that individual.   There are time limits for this reinvestment to take place where the new property must be acquired in the period from 12 months before the old property is sold (i.e. it can actually be purchased before the sale takes place!) through to 36 months afterwards.  Full relief is available where the entire proceeds from sale are reinvested in the new asset which has the effect  that no CGT would then become payable on the property sold, with partial relief given for only part reinvestment.  Unfortunately, it is quite difficult, but not impossible to gain relief for disposals or purchases of houses given the non-trade use of many of these properties.

The whole subject of Business Asset Rollover Relief is a complex one and readers should seek full advice before considering property transactions.