Taxation (UK) · Chargeable gains for companies

Rollover Relief for Replacement of Business Assets in ACCA TX-UK

Updated 11 October 2026 · Fact-checked

Rollover relief defers a company's chargeable gain when it sells a qualifying business asset and reinvests the proceeds in another qualifying asset within the time limit. The gain is deducted from the base cost of the new asset. If you do not reinvest all the proceeds, the unspent amount is taxed now, up to the gain.

Understand Rollover Relief for Replacement of Business Assets

Rollover relief lets a company sell a business asset without paying corporation tax on the gain straight away. The gain is not removed. It is deferred by reducing the base cost of the replacement asset. When you later sell the replacement asset, the gain comes back, because the lower cost gives a bigger gain.

The relief exists so that a business can replace worn-out or outgrown assets without losing cash to tax. It only applies if the proceeds are reinvested in assets used in the trade.

Both the old asset and the new asset must be qualifying assets used in the trade of the company. The classes you must know are land and buildings, fixed plant and machinery, and goodwill. Shares, cars and movable plant do not qualify.

The old asset must have been used in the trade throughout the period the company owned it. If it was not, the gain is time-apportioned. Relief is restricted to the part of the gain that relates to business use, and the rest is taxed now.

The new asset must be bought in a window running from one year before to three years after the date of disposal of the old asset. The company must make a claim. If you spend only part of the proceeds on the new asset, the relief is restricted and some gain is taxed now.

For a depreciating asset, which is an asset with an expected life of 60 years or less, such as a lease with 60 years or less to run or fixed plant and machinery, the gain is not deducted from the cost. It is held over and comes into charge on the earliest of three events: the sale of the depreciating asset, the date the asset ceases to be used in the trade, and ten years after the acquisition of the new asset. This is sometimes called holdover, but it is only a deferral.

Key rules to remember

Immediate gain with partial reinvestment: Gain taxable now = the lower of (a) the full gain and (b) proceeds not reinvested (proceeds – amount reinvested); The rest of the gain, which is the gain less the amount taxed now, can be rolled over.
Gain rolled over: Gain rolled over = total gain – gain taxable now; Only the part of the gain the company claims to roll over is deducted from cost.
Base cost of non-depreciating replacement asset: Base cost = actual cost of new asset – gain rolled over; The gain is deducted from the cost, so a later disposal produces a bigger gain.
Time limit for reinvestment: Acquire new asset from 1 year before to 3 years after the date of disposal of the old asset; Count the window from the disposal date. The company must make a claim.
Depreciating asset holdover: Held-over gain taxed on the earliest of: disposal of the depreciating asset; it ceasing to be used in the trade; 10 years after acquiring it; The cost of the depreciating asset is not reduced. The gain is deferred and not deducted from cost.
Qualifying classes: Land and buildings; fixed plant and machinery; goodwill; used in the trade; Old and new assets need not be in the same class.

How to solve Rollover Relief for Replacement of Business Assets questions

Use the same order for every rollover relief question. It keeps the arithmetic clean and shows the marker each step.

1Check that the old asset is a qualifying asset used in the trade. Check that the new asset qualifies too. If either does not, there is no relief. Also check that the old asset was used in the trade throughout ownership. If not, time-apportion the gain and restrict relief to the business-use part.
2Compute the chargeable gain on the old asset: proceeds less cost, less enhancement expenditure. There is no indexation allowance. Use the figures given in the question.
3Check the time window. The new asset must be bought between one year before and three years after disposal.
4Compare proceeds with the amount reinvested. If all proceeds are reinvested, the whole gain can be rolled over. If not, the unspent proceeds are taxed now, capped at the gain.
5Work out the gain rolled over and the gain taxable now.
6If the new asset is non-depreciating, deduct the rolled-over gain from its cost to get the new base cost. If it is depreciating, hold the gain over and note the date it will come into charge.
7Add the gain taxable now to the company's chargeable gains for the period. State that a claim is needed.

Quickest way: Three-line rollover check

When to use it: Use this in Section B objective test cases or when a Section C question only wants the immediate gain and the new base cost.

Gain = proceeds – cost. Unspent proceeds = proceeds – amount reinvested.
Taxable now = lower of the gain and the unspent proceeds. Rolled over = gain – taxable now.
New base cost = cost of new asset – rolled over gain (non-depreciating asset only).

Common mistakes in Rollover Relief for Replacement of Business Assets

Rolling over the gain on an asset that does not qualify, such as shares or a car.
Students think every business asset qualifies.
Fix: Check the class first. Only land and buildings, fixed plant and machinery, and goodwill qualify. The new asset must also be a qualifying class used in the trade.
Taxing the whole unspent amount even when it exceeds the gain.
Students forget the cap.
Fix: The amount taxed now is the lower of the gain and the unspent proceeds. You can never tax more than the gain.
Reducing the cost of a depreciating asset by the held-over gain.
Students apply the non-depreciating rule to every case.
Fix: For a depreciating asset the gain is held over and comes into charge later. The cost of the new asset is unchanged.
Getting the time window wrong, for example allowing three years before or one year after.
The two periods are easy to swap.
Fix: Remember one year before and three years after the disposal date.
Comparing the reinvestment with the gain rather than with the proceeds.
Students focus on the gain because that is what is taxed.
Fix: The test uses proceeds. Reinvest all the proceeds and the full gain can be rolled over. Reinvest less and the shortfall in proceeds is taxed, capped at the gain.
Forgetting that a claim is required and that the relief is only deferral.
Students treat the relief as automatic.
Fix: State that the company must claim. Show that the lower base cost increases the gain on the later sale.

Worked examples

Example 1

Brook Ltd sold a factory used in its trade in August 2025 for £500,000. It had cost £300,000. Brook Ltd bought a new warehouse for use in its trade in December 2025 for £560,000. Compute the chargeable gain now and the base cost of the warehouse, assuming a claim for rollover relief is made.

Show the solution

Both assets are land and buildings used in the trade, so they qualify.
The warehouse was bought within three years after the disposal, so the time limit is met.
Gain on the factory = £500,000 – £300,000 = £200,000.
All proceeds of £500,000 are reinvested, because the cost of £560,000 is higher than the proceeds. So the unspent proceeds are nil.
Gain taxable now = nil. Gain rolled over = £200,000.
Base cost of warehouse = £560,000 – £200,000 = £360,000.

Answer: Chargeable gain now is nil. The £200,000 gain is rolled over and the warehouse has a base cost of £360,000.

Example 2

Reed Ltd sold goodwill used in its trade for £400,000 in June 2025. The goodwill had a cost of £150,000. In March 2026 Reed Ltd bought a freehold building for use in its trade for £340,000. Compute the gain taxable now and the base cost of the building, assuming a claim is made.

Show the solution

Goodwill and a building used in the trade both qualify, and the purchase is within three years after the disposal.
Gain = £400,000 – £150,000 = £250,000.
Unspent proceeds = £400,000 – £340,000 = £60,000.
Gain taxable now = lower of £250,000 and £60,000 = £60,000.
Gain rolled over = £250,000 – £60,000 = £190,000.
Base cost of building = £340,000 – £190,000 = £150,000.

Answer: £60,000 is chargeable now. £190,000 is rolled over, giving the building a base cost of £150,000.

Exam tips

Write down the qualifying classes at the start of your answer. Markers give credit for stating that both assets must be used in the trade.
State the time window explicitly: one year before to three years after disposal. Compare it with the dates in the question.
In a partial reinvestment question, show the unspent proceeds line. It carries the marks even if the gain figure is wrong.
If the new asset is a depreciating asset, meaning one with an expected life of 60 years or less, such as a lease with 60 years or less to run or fixed plant and machinery, say so and name the three events that trigger the charge.
Check whether the old asset was used in the trade throughout ownership. If it was not, time-apportion the gain and restrict the relief to the business-use part.
Remember that a claim is needed. Put one sentence on this in a written part.

Practice questions from Chargeable gains for companies

Rollover Relief for Replacement of Business Assets in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

ACCA Strategic ProfessionalRollover Relief for Companies

Rollover Relief for Replacement of Business Assets: frequently asked questions

Which assets qualify for rollover relief for a company?

Land and buildings, fixed plant and machinery, and goodwill, provided they are used in the company's trade. The old and the new asset do not need to be in the same class. Shares and movable plant do not qualify.

What is the time limit for reinvesting?

The new asset must be acquired in the period from one year before to three years after the disposal of the old asset. The company must make a claim.

What happens if I reinvest only some of the proceeds?

The unspent proceeds are taxed now, up to the amount of the gain. The rest of the gain is rolled over and deducted from the cost of the new asset.

How does rollover relief work for depreciating assets?

The gain is held over instead of being deducted from the cost. It becomes chargeable on the earliest of the sale of the depreciating asset, it ceasing to be used in the trade, or ten years after it was acquired.