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Selling land or property? Have you considered tax reliefs available?

By Hugh Simpson
17th Jun 2024

Are you considering selling land or property connected with your business, then you may be eligible for tax reliefs to reduce the tax on disposal?

Tax rules dictate that when a trading business disposes of land and property used in the business then up to 20% (or 24% for residential property) of any gain arising could be payable in Capital Gains Tax! However, there are reliefs available in the form of either Rollover Relief or Business Asset Disposal Relief (BADR), provided eligibility criteria are met.

Rollover Relief

The primary condition of Rollover Relief is the continuation of a trade after the disposal of the assets in question. The basic rules are if some or all the proceeds from the sale of the land or property are re-invested to purchase new trading assets for the business, then the disposal may qualify for partial or full Rollover Relief depending on the extent of re-investment in further trading assets. The list of eligible assets extends to land, buildings and certain fixed plant and machinery. The re-investment must occur within a four-year period, being up to one year before or three years after the disposal date of the original asset. The mechanism of Rollover Relief is that instead of paying tax at the point the land or property is disposed, the gain is “rolled over” into the new assets and, depending on the type of assets acquired, is only crystallised at the point of disposal of the new assets.

Business Asset Disposal Relief (formerly Entrepreneurs’ Relief)

The tax rate under BADR is 10% of the gain, however, unlike rollover relief, the main aspect of eligibility is that there must be a material cessation of the business itself or your involvement in the business. The main eligibility criteria to qualify for the relief is that you must have owned the business for at least two years prior to the disposal of the assets.

An individual is entitled to claim a maximum lifetime amount of £1m of capital gains under BADR.

These are only the basic rules of these particular reliefs, and each situation should be assessed on an individual basis. Forward planning is essential for all property disposals with guidance from your professional advisors.