Taxation (UK) · The use of exemptions and reliefs in deferring and minimising corporation tax liabilities

Rollover Relief on Business Assets for Companies in ACCA TX-UK

Updated 11 October 2026

Rollover relief lets a company defer a chargeable gain on a qualifying business asset if it reinvests the full sale proceeds in another qualifying asset. The new asset must be bought from 12 months before to 3 years after the sale. The gain reduces the new asset's base cost. If you reinvest only part, the unspent proceeds are taxed now.

Understand Rollover Relief on Business Assets

A company that sells a business asset at a gain normally pays corporation tax on that gain. Rollover relief stops that tax bill from falling due while the company is still putting its money into the business. The gain is not removed. It is deferred by reducing the cost of the replacement asset, so a larger gain arises when the new asset is sold.

Both the old asset and the new asset must qualify, and each must be used in the company's trade. For TX-UK, think of land and buildings and fixed plant and machinery. Assets such as shares, or goods held as trading stock, do not qualify. The company must also reinvest within the time window: 12 months before the disposal to 3 years after it.

The relief depends on how much of the proceeds you reinvest, not how much profit. If all the proceeds go into the new asset, the whole gain is deferred. If some proceeds are kept, the gain is taxed now up to the amount kept. The rest is deferred.

A special rule applies to depreciating assets. A depreciating asset is either (a) an asset with an expected life of 60 years or less, or (b) fixed plant and machinery, whatever its life. Fixed plant and machinery is therefore always depreciating. Land and buildings are normally non-depreciating, so they follow the normal rule, unless their expected life is 60 years or less. In practice, the depreciating-asset holdover rule applies mainly to fixed plant and machinery. For a depreciating replacement asset, the gain is not deducted from the new asset's cost. It is held over and becomes chargeable on the earliest of three events: the sale of the replacement asset, the replacement ceasing to be used in the trade, or 10 years after it was acquired.

Do not confuse this with gift relief. Gift relief defers a gain when a business asset is given away or sold at undervalue, and in TX-UK it is an individual's relief. Rollover relief applies when the asset is sold and the proceeds are reinvested. It is available to companies and to individuals. The test is the transaction: sale and reinvestment points to rollover relief, while a gift or sale at undervalue points to gift relief.

Key rules to remember

Time limit for reinvestment: Acquire new asset from 12 months before to 3 years after the disposal; Outside this window no rollover relief is available on that purchase.
Full relief condition: Proceeds reinvested ≥ Proceeds of old asset → whole gain deferred; Both assets must be qualifying assets used in the trade.
Gain chargeable now (partial reinvestment): Lower of (Gain, Proceeds not reinvested); Proceeds not reinvested = Proceeds − Amount reinvested. If this is zero or negative, no gain is chargeable now.
Gain rolled over: Total gain − Gain chargeable now; This is the amount deducted from the cost of the new asset.
Base cost of replacement asset: Cost of new asset − Gain rolled over; Applies to non-depreciating replacement assets, which are normally land and buildings (unless their expected life is 60 years or less). Fixed plant and machinery is always depreciating, so it follows the holdover rule below.
Depreciating asset holdover: Gain is frozen, then charged on the earliest of: sale of the new asset, ceasing to use it in the trade, 10 years after acquisition; The gain is not deducted from the new asset's cost. This applies where the replacement is a depreciating asset: an asset with an expected life of 60 years or less, or fixed plant and machinery whatever its life. In practice it is mainly met with fixed plant and machinery.

How to solve Rollover Relief on Business Assets questions

Use the same order every time. It keeps the figures tidy and shows the marker each step.

1Compute the gain on the old asset: proceeds less cost less any allowable costs.
2Check that the old asset and the new asset both qualify, and that both are used in the company's trade.
3Check the timing. The new asset must be bought from 12 months before to 3 years after the sale. Note the date.
4Compare the proceeds with the amount reinvested. If everything is reinvested, the whole gain is deferred.
5If not, compute the proceeds not reinvested. The chargeable gain now is the lower of that figure and the gain.
6Deduct the rolled-over gain from the cost of the new asset to find its base cost. If the new asset is depreciating (mainly fixed plant and machinery, or any asset with an expected life of 60 years or less), say instead that the gain is held over and state when it comes back into charge.
7State the gain left in the corporation tax computation and mention that the relief must be claimed.

Quickest way: Three-line rollover check

When to use it: Use it in Section A and Section B objective questions, where you need one number fast.

Find the gain and the proceeds.
Proceeds not reinvested = Proceeds − Amount reinvested. Chargeable now = lower of this and the gain.
Base cost of new asset = Cost − (Gain − Chargeable now).

Common mistakes in Rollover Relief on Business Assets

Comparing the gain with the amount reinvested instead of the proceeds.
Students think relief is about profit being reinvested.
Fix: Always compare the proceeds of the old asset with the cost of the new asset.
Taxing the whole unspent proceeds even when they exceed the gain.
The lower-of rule is forgotten.
Fix: The gain taxed now can never be more than the total gain. Take the lower of the two.
Missing the time window, for example allowing 3 years before the sale.
The two periods are mixed up.
Fix: Write '1 year before, 3 years after' beside the dates in your answer.
Applying rollover relief to a non-qualifying asset such as shares.
Students focus on the numbers and skip the asset check.
Fix: Check the asset class first. Use land and buildings or fixed plant and machinery.
Deducting the rolled-over gain from the cost of a depreciating asset.
The standard rule is applied automatically.
Fix: For depreciating assets (mainly fixed plant and machinery, or any asset with an expected life of 60 years or less), hold the gain over and say when it becomes chargeable.
Confusing rollover relief with gift relief.
Both defer gains on business assets.
Fix: Rollover relief needs a sale and reinvestment in a qualifying asset. Gift relief covers gifts or sales at undervalue and is an individual's relief. Look at the transaction to decide which applies.

Worked examples

Example 1

X Ltd sold a factory in August 2025 for £500,000. It cost £200,000. There are no other costs. In January 2026 X Ltd bought a new factory for £540,000 for use in its trade. Compute the gain chargeable and the base cost of the new factory.

Show the solution

Gain = £500,000 − £200,000 = £300,000.
Both assets are land and buildings used in the trade, so both qualify.
The new factory was bought about five months after the sale, within the 3-year limit.
All proceeds are reinvested (£540,000 ≥ £500,000), so the full £300,000 gain is deferred.
Base cost of the new factory = £540,000 − £300,000 = £240,000.

Answer: The chargeable gain now is nil. The base cost of the new factory is £240,000.

Example 2

Y Ltd sold a warehouse for £800,000. It cost £350,000. There are no other costs. Within 18 months, Y Ltd bought a replacement warehouse for £720,000 for use in its trade. Compute the gain chargeable now and the base cost of the new warehouse.

Show the solution

Gain = £800,000 − £350,000 = £450,000.
Proceeds not reinvested = £800,000 − £720,000 = £80,000.
Gain chargeable now = lower of £450,000 and £80,000 = £80,000.
Gain rolled over = £450,000 − £80,000 = £370,000.
Base cost of new warehouse = £720,000 − £370,000 = £350,000.

Answer: A gain of £80,000 is chargeable now. £370,000 is deferred. The base cost of the new warehouse is £350,000.

Exam tips

Write the dates of the sale and the purchase and tick them against the 12-month and 3-year limits.
In objective questions, work out proceeds not reinvested first. It gives the answer quickly.
In written answers, state that the relief is a claim and name the qualifying asset category.
If the new asset is fixed plant and machinery, it is always depreciating whatever its life. Say the gain is held over and not deducted from cost.
Keep rollover relief separate from gift relief. Ask whether the asset was sold and the proceeds reinvested, or given away or sold at undervalue.

Practice questions from The use of exemptions and reliefs in deferring and minimising corporation tax liabilities

Rollover Relief on Business Assets: frequently asked questions

Which assets qualify for rollover relief in TX-UK?

For companies, think of land and buildings and fixed plant and machinery used in the trade. Both the old asset and the new asset must qualify. Shares and trading stock do not. Land and buildings are normally non-depreciating, unless their expected life is 60 years or less. Fixed plant and machinery is always depreciating, so the gain is held over rather than deducted from its cost.

What is the time limit for rollover relief?

The replacement asset must be acquired from 12 months before to 3 years after the sale of the old asset. The relief must also be claimed. Check the claim time limit in your Finance Act 2025 TX-UK study text.

What happens if I only reinvest part of the proceeds?

The gain is taxed now up to the amount of proceeds not reinvested, but never more than the total gain. The rest is deferred and deducted from the cost of the new asset.

How is rollover relief different from gift relief?

Rollover relief applies when an asset is sold and the proceeds are reinvested in another qualifying asset. It is available to companies and individuals. Gift relief applies when a business asset is given away or sold at undervalue, and in TX-UK it is an individual's relief.