Business Asset Rollover Relief - Capital Gains Tax (CGT) - tax and financial advice from independent financial adviser (IFA) Isis Financial Planners
Isis Financial Planners' Maggie Fleming answers reader's questions in Saturday's Daily Telegraph newspaper for the Property Clinic section.
There is a wealth of information on all aspects of property and tax from Capital Gains Tax and Inheritance Tax to other technical and challenging issues of this complex subject. This page shows the articles for July 2010. To browse the articles from a previous year, please visit the main Property and Tax page of this website.
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- Capital gain rollover - that would be a relief - 15 July 2010
I have a buy-to-let (BTL) that I would like to sell. If I reinvest all the proceeds in another BTL, would I have to pay Capital Gains Tax on the profits from the sale or could I roll it over until I sell this second property, and so on?
Maggie Fleming writes:
What you are describing is Business Asset Rollover Relief, where the gain is rolled over into a replacement asset and tax deferred until you sell that asset or roll the gain over again.
The relief applies to trades but HMRC does not regard a rental business as a trade unless it qualifies under the Furnished Holiday Lettings rules. For that it must be available for rent to the public commercially for at least 140 days in the tax year and it must actually be let for at least 70 days. Periods of longer-term occupation (defined as a continuous period of more than 31 days in the same occupation) should not exceed 155 days in the tax year.
If all these requirements are met, the property will qualify for rollover relief and also for entrepreneurs' relief, as well as favourable income tax treatment. If, however, you rent the property to long-term tenants, there are no special business reliefs and you will normally have to pay CGT on the gain when you sell it.
The furnished holiday lettings regime is extremely beneficial for those who qualify and it now applies to properties within the European Economic Area as well as in the UK. It was threatened with abolition in 2009 but the coalition Government has reprieved it. The Chancellor has announced a consultation on plans to change the tax treatment from next April. It is expected that the eligibility rules will be tightened at that time.
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