- Last Updated: 07 April 2021
Which Capital Gains Tax (CGT) reliefs apply when a person, replaces or disposes of an asset used by a business, the whole or part of a business, or shares in a company.
This is a freeview 'At a glance' guide to Capital Gains Tax (CGT) reliefs for businesses.
There are six main reliefs, all references are to the Taxation of Chargeable Gains Act 1992 (TCGA).
Relief | Type of asset | Section |
Rollover (replacement of business assets) | Assets used for the purposes of a trade or a deemed trade | 152 |
Rollover (incorporation) | A business and its assets (no requirement for the business to be a "trade") on incorporation in return for shares. | 162 |
Disincorporation (for transfers between 1 April 2013 and 31 March 2018) |
Disposal of a company's business; its land and property and goodwill, to its shareholders (no requirement for the business to be a 'trade') |
162B |
Rollover relief (compulsory purchase) |
Land sold due to compulsory purchase, where the consideration is reinvested to acquire new land |
247 |
Holdover (gifts) |
Asset used for the purpose of a trade, or shares in a trading company s260: assets (not necessarily business assets) that are immediately chargeable to IHT |
165 /260 |
Business Asset Disposal Relief (Entrepreneurs' Relief) |
A business and business assets, 'business' means a trade, profession or vocation. Business assets include shares in a trading company |
169H |
Investors' Relief |
A sale of shares by a company investor |
169VB |
Rollover: replacement of business assets
The relief is available to individuals and companies.
- A capital gain made on the disposal of a business asset is deferred by rolling it over against the cost of acquiring a replacement business asset.
- Relief is restricted when the proceeds of the disposal of the first asset are not fully reinvested in the new one.
- The assets do not have to be of the same type.
- A company may deduct the indexation allowance (up to 31 December 2017) before rolling over its gains.
- Business Asset Disposal Relief (BADR) (Entrepreneurs' Relief) cannot be deducted from a gain before it is rolled over.
- The relief is extended to groups so that a gain made by one company can be rolled into the purchase of a qualifying asset by another group company, subject to certain conditions.
- See CGT: Rollover Relief
Rollover relief (section 162): transfer of a business to a company
This relief is available to individuals.
- The gain on the disposal of an unincorporated business and its assets is deducted from the base cost of the new shares issued by the company.
- It is given automatically.
- It is restricted if part of the consideration is cash.
- An all or nothing relief, all assets including goodwill and land and buildings, with the exception of cash, must be transferred to the new company.
- See CGT: Rollover (Incorporation) Relief
Disincorporation relief (section 162B): transfer of a company's business to its shareholders
This relief was available to companies. It was withdrawn on 31 March 2018.
- The gain on the disposal of the company's business and its assets was deducted from the deemed acquisition cost of the shareholders.
- Claims were restricted to the disposal of land and property and goodwill with a market value below £100,000.
- See Disincorporation Relief
Rollover relief: compulsory purchases of land (section 247)
This rollover relief is available when land is disposed of to an authority exercising compulsory powers.
- The landowner must not have been actively looking for a sale or showing a willingness to sell.
- The consideration received for the disposal must be reinvested in other land in the period commencing 12 months before and ending 3 years after the disposal.
- This relief cannot be claimed if the replacement land will be subject to a private residence relief claim in respect of the first 6 years of acquisition
Holdover or 'gift' relief (section 165 or 260)
This relief is available to individuals and the trustees of a settlement.
- The gain on the disposal of both business and some non-business assets is deferred by holding it over.
- The donor does not pay tax at the time of the gift, the gain is deferred and deducted from the donee's base cost.
- A joint election is required where under s165.
- No valuation needed (HMRC Statement of Practice 8/92).
-
Relief can be restricted if there is non-trade use of assets.
-
No relief is available under s260 for transfers to a trust that is:
- Settlor interested
- Dual or non-resident or
- A qualifying disabled person’s trust.
- See CGT: Holdover/Gift Relief
Business Asset Disposal Relief (formerly known as Entrepreneurs' Relief): disposals of business assets
The relief is available to individuals and the trustees of a settlement.
The relief ensures that that chargeable gains up to a lifetime limit that are subject to the relief are taxed at 10%, as opposed to 20% and it applies to gains made:
- On the disposal of business assets.
- On a disposal of trust business assets.
- On a disposal associated with a material disposal.
See: Business Asset Disposal Relief (Entrepreneurs' Relief)
See How to incorporate a business for an example of how this relief is calculated and interacts with the other reliefs.
Investors' Relief
- A CGT relief introduced for share purchases made on or after 17 March 2016.
- Available to individuals on the disposal of qualifying shareholdings.
- Reduces tax charged on qualifying gains to 10% for higher rate taxpayers.
- Has some similarities to Business Asset Disposal Relief (Entrepreneurs' Relief).
- Not available to directors or employees.
- See Investors' Relief
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