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Entrepreneur & Business Asset Rollover Relief Explained

Calculating your Capital Gains Tax (CGT) can be a confusing process – assessing what relief and support is available for you however is relatively straightforward and there are a number of business related reliefs that you can apply to your CGT calculations.

In this blog we will explore what support and relief is available to you.

An Overview of CGT Tax Relief

Relief Description Eligibility
Entrepreneurs Relief Pay 10% Capital Gains Tax on qualifying profits if you sell all or part of your business (instead of the normal rates) Designed for sole traders, business partners or those with shares in a ‘personal company
Business Asset Rollover Relief Delay paying Capital Gains Tax when you sell or dispose of some types of asset if you replace them Buy the new asset within 3 years of disposing of the old one. Use the old and new assets in your business
Incorporation Relief Delay your CGT when you transfer a business to a company Transfer all your business assets (except cash) in return for shares in the company
Gift Hold-Over Relief Pay no CGT if you give away a business asset – the person you gave it to pays tax when they sell it on You used the business asset for trading as a sole trader or partner

Business Asset Rollover Relief Explained

You may be able to delay paying your Capital Gains Tax for a number of reasons, namely however if you either:

  • Use all or part of the proceeds to buy new business assets
  • Sell or dispose of some business assets

Business Asset Rollover Relief means in essence that you will not pay any tax until you sell the new asset – You may then need to pay tax on the gain from the original asset. You can also be able to claim Business Asset Rollover Relief if you:

  • Use the proceeds to improve an asset(s) that you already own
  • You are planning to buy new assets with your proceeds but have not yet done so

Are You Eligible For Business Asset Relief?

To qualify for Business Asset Rollover Relief you will need to:

  • Have bought the new assets within 3 years of selling or disposing of the old ones (or up to one year before)
  • Be trading when you sell the old assets and buy the new ones
  • Use the old and new assets in your business

You can claim relief on land, building, plant and machinery assets.

Different rules also apply for those claiming a partial relief, such as:

  • You can only reinvest part of the proceeds from selling the old assets
  • The old assets were only partly used in your business
  • Or if you use the proceeds to buy ‘depreciating assets’ (fixed plant or machinery, or assets expected to last for less than 60 years)

We would always advise that you take professional advice as each business is different and CGT relief will differ based on the assets. For more information please use the HMRC help sheet HS290 Business asset roll-over relief.

Incorporation Relief

You may also be able to delay paying CGT if you transfer your business to a company in return for shares – in short this means that you will not pay any tax until you have you have sold or ‘disposed’ of the shares

To qualify for Incorporation Relief, you must be either a:

  • Sole trader or in a business partnership
  • Or transfer the business and all its existing assets (except cash) in return for shares in the company

Please Note: You do not have to claim Incorporation Relief yourself  – you’ll be notified and get it automatically if you’re eligible. To work out the amount you need to pay Capital Gains Tax on you simply deduct the gain you made when selling your business from the market value of the shares you received.

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