Advanced Taxation (UK) · Corporation tax: chargeable gains for companies

Rollover Relief for Companies in ACCA ATX

Updated 11 October 2026 · Fact-checked

Rollover relief lets a company defer a chargeable gain on a qualifying business asset if it reinvests the proceeds in another qualifying asset between 12 months before and 3 years after the sale. The gain is deducted from the new asset's base cost. If you reinvest only part of the proceeds, the unspent amount is taxed now.

Understand Rollover Relief for Companies

A company that sells a business asset at a gain normally pays corporation tax on that gain straight away. That can hurt a business that must replace the asset to keep trading. Rollover relief (replacement of business assets relief) fixes this. It does not remove the gain. It defers it.

The relief works in three parts. First, both the asset sold and the asset bought must be qualifying assets, and both must be used in the company's trade. The main qualifying classes are land and buildings, and fixed (immovable) plant and machinery. Post-April 2002 goodwill of a company is dealt with under the intangible fixed assets regime, so do not treat it as a chargeable gains asset here. Second, the company must reinvest the proceeds within the time window: from 12 months before to 3 years after the disposal. Third, the company must make a claim.

If all the proceeds are reinvested, the whole gain is rolled over. If only part is reinvested, the amount of proceeds not reinvested is taxed now, up to the size of the gain. The rest is rolled over. The rolled-over gain is deducted from the base cost of the new asset. So the gain comes back as a larger gain when the new asset is later sold, unless that sale is also rolled over.

There is a special rule for depreciating assets. These are fixed plant and machinery, and assets with a life of 60 years or less (such as short leases). The gain is not deducted from the new asset's base cost. It is held over and becomes chargeable on the earliest of three events: the sale of the depreciating asset, the asset ceasing to be used in the trade, or 10 years after the depreciating asset was acquired. So 10 years after acquisition is only the latest possible date. The company can claim to transfer the held-over gain to a non-depreciating asset acquired before the gain crystallises. The transfer does not happen automatically.

In a gains group, the UK members are treated as a single trader for this relief. So one member can sell and another can buy, and the relief still applies. Remember there is no annual exempt amount for companies, and the gain is taxed at corporation tax rates. Indexation allowance was frozen at December 2017, so it applies only up to that date. Include it only where the question gives you the figure. In the exam the question normally gives you the gain figure or the cost and proceeds.

Key rules to remember

Time window for reinvestment: From 12 months before the disposal to 3 years after the disposal; The new qualifying asset must be acquired within this period. Count from the date of disposal.
Gain chargeable now (partial reinvestment): Chargeable now = lesser of (gain) and (proceeds − amount reinvested); If all proceeds are reinvested, nothing is chargeable now. Only proceeds count, not cost.
Gain rolled over: Rolled-over gain = total gain − gain chargeable now; This is the amount deferred.
Base cost of the new asset: New base cost = cost of new asset − rolled-over gain; Applies to non-depreciating assets such as land and buildings.
Depreciating asset: Gain held over until the earliest of: sale of the asset, it ceasing to be used in the trade, or 10 years after acquisition; Base cost of the new asset is not reduced. The held-over gain can be moved to a non-depreciating asset.
Qualifying conditions: Old and new assets both qualifying classes AND both used in the trade AND proceeds reinvested in the window AND claim made; Missing any one condition means no relief, or only partial relief.
Claim deadline: Within 4 years of the end of the later accounting period of the disposal and the acquisition; A company can also make a provisional claim if it intends to reinvest.

How to solve Rollover Relief for Companies questions

Use this order for any question on rollover relief for a company. Set out each step so you pick up the method marks even if one figure is wrong.

1Compute the gain on the old asset: proceeds less cost and allowable costs. Use any indexation figure the question gives you. Do not invent one.
2Check qualifying conditions: both assets in qualifying classes, both used in the trade, and the new asset bought within 12 months before to 3 years after the sale. State your conclusion on each in the answer.
3Decide whether the new asset is depreciating (fixed plant and machinery, or a life of 60 years or less) or non-depreciating (such as freehold land and buildings).
4Compare proceeds with the amount reinvested. If everything is reinvested, the whole gain is rolled over. Otherwise the gain chargeable now is the lesser of the gain and the proceeds not reinvested.
5For a non-depreciating asset, deduct the rolled-over gain from the cost of the new asset to get the new base cost. For a depreciating asset, record the held-over gain and list the three crystallisation events.
6Say what goes into taxable total profits now, and apply the corporation tax rate only if the question gives enough profit information.
7Mention a claim and its deadline, and any group point if the sale and purchase are by different group companies.

Quickest way: Four-line rollover check

When to use it: Use this when you are short of time, or when a Section A question asks only for the tax effect of reinvesting a stated amount.

Write: Gain = £X. Proceeds = £Y. Reinvested = £Z.
Chargeable now = lesser of X and (Y − Z), and not less than nil. Rolled = X − chargeable now.
New base cost = Z − rolled. If the new asset is depreciating, write 'held over, no base cost reduction' instead.
Add one line on timing (12 months before, 3 years after) and one on the claim.

Common mistakes in Rollover Relief for Companies

Taxing the gain by reference to the amount not reinvested out of cost rather than out of proceeds.
Students think about how much profit was reinvested, not how much of the sale price.
Fix: Always compare the proceeds with the amount spent on the new asset. The unspent proceeds are the most that can be chargeable now.
Charging the full unspent proceeds even when they exceed the gain.
Students forget the 'lesser of' limit.
Fix: Cap the chargeable amount at the gain. You can never be taxed on more than the gain through this rule.
Reducing the base cost of a depreciating asset by the rolled-over gain.
The non-depreciating rule is learned first and applied to everything.
Fix: For fixed plant and machinery, and assets with a life of 60 years or less, hold the gain over. Name the three events that crystallise it.
Getting the time window wrong, for example saying 3 years before and 1 year after.
The two numbers are easy to swap.
Fix: Remember it as 1 year before, 3 years after. Write the actual dates in your answer.
Giving relief where the old or new asset is not used in the trade, or is not in a qualifying class.
Students jump to the calculation and skip the conditions, which scenario facts often test.
Fix: Check the scenario for investment property, shares, or assets used by the owner outside the trade. Say clearly that relief is denied or restricted.
Forgetting that a held-over gain on a depreciating asset can be moved to a non-depreciating asset, or forgetting that this needs a claim.
Students stop at the three crystallisation events and treat the 10-year date as fixed.
Fix: In planning questions, say the company can claim to transfer the held-over gain to a qualifying non-depreciating asset such as freehold land, acquired before the gain crystallises. The gain then reduces that asset's base cost. The transfer is not automatic.

Worked examples

Example 1

Taylor Ltd sold a freehold factory used in its trade for proceeds of £900,000 in September 2026. It had cost £400,000. The chargeable gain is the proceeds less cost (ignore indexation). Taylor Ltd buys a new freehold factory for its trade in March 2027. Compute the gain chargeable now and the base cost of the new factory (a) if the new factory costs £1,000,000, and (b) if it costs £750,000.

Show the solution

Gain = £900,000 − £400,000 = £500,000.
Both assets are freehold buildings used in the trade, and March 2027 is within 3 years after the disposal, so the conditions are met if a claim is made. The new factory is not a depreciating asset.
(a) Reinvested £1,000,000 is at least the proceeds of £900,000, so all proceeds are reinvested. Chargeable now = nil. Rolled over = £500,000.
(a) New base cost = £1,000,000 − £500,000 = £500,000.
(b) Proceeds not reinvested = £900,000 − £750,000 = £150,000.
(b) Chargeable now = lesser of £500,000 and £150,000 = £150,000. This goes into taxable total profits.
(b) Rolled over = £500,000 − £150,000 = £350,000.
(b) New base cost = £750,000 − £350,000 = £400,000.

Answer: (a) Nothing is chargeable now and the new factory has a base cost of £500,000. (b) £150,000 is chargeable now, £350,000 is rolled over and the new factory has a base cost of £400,000.

Example 2

Kent Ltd sold land used in its trade on 15 August 2026 for £600,000, making a gain of £200,000. On 1 December 2026 it bought new fixed plant and machinery for £650,000 for use in its trade. Explain the rollover relief position and say when the gain becomes chargeable. Then say what Kent Ltd could do to stop the gain coming back into charge on the plant's crystallisation events.

Show the solution

Land and plant and machinery can both qualify. Plant and machinery qualifies only if it is fixed (immovable). The question says the plant is fixed, so it qualifies. In the exam, confirm this from the question. Both assets are used in the trade.
The window runs from 15 August 2025 to 15 August 2029. The purchase on 1 December 2026 is inside it.
All proceeds of £600,000 are reinvested, because £650,000 is more than £600,000. So the whole gain of £200,000 can be deferred, with nothing chargeable now. Kent Ltd must make a claim.
The new asset is fixed plant and machinery, which is a depreciating asset. The gain is therefore held over. The base cost of the plant is not reduced.
The held-over gain of £200,000 becomes chargeable on the earliest of three events: the sale of the plant, the plant ceasing to be used in the trade, or 10 years after the plant was acquired. The 10-year date is 1 December 2036. That is only the latest possible date, because one of the other events may happen sooner.
Kent Ltd could claim to transfer the held-over gain to a qualifying non-depreciating asset, such as freehold trade premises, acquired before the gain crystallises. The gain would then reduce that asset's base cost instead. The transfer needs a claim and does not happen automatically.

Answer: The whole £200,000 gain is deferred on a claim, with nothing taxed now. It is held over, not deducted from the plant's cost. It becomes chargeable on the earliest of the plant's sale, the plant ceasing to be used in the trade, or 1 December 2036 (the latest possible date). Kent Ltd can claim to transfer the gain to a non-depreciating asset acquired before it crystallises. That defers the gain further, but does not remove it.

Exam tips

Write out the qualifying conditions in the answer. In ATX the scenario is often built so that one condition fails, such as an asset let to a third party rather than used in the trade, or plant that is not fixed.
Always give dates for the window. Work out the start and end dates from the disposal date and say whether the purchase falls inside.
Distinguish depreciating from non-depreciating assets in every answer. The mark scheme usually has a separate mark for it.
In planning questions, link rollover relief to cash flow. Say that the tax is deferred, not removed, and that reinvesting only part of the proceeds triggers an immediate charge.
Show professional skills by giving a clear recommendation. For example, if the company wants to avoid the crystallisation events of a depreciating asset, advise it to claim to move the held-over gain to a non-depreciating asset such as freehold premises acquired before the gain crystallises. Say that the gain is then deferred, not removed.

Practice questions from Corporation tax: chargeable gains for companies

Rollover Relief for Companies in other exams

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

ACCA Applied SkillsRollover Relief for Replacement of Business Assets

Rollover Relief for Companies: frequently asked questions

What is the time limit for rollover relief for companies?

The new asset must be bought between 12 months before and 3 years after the disposal of the old asset. The claim is usually due within 4 years of the end of the later accounting period of the disposal and the acquisition. A provisional claim is possible if the company intends to reinvest.

How do I calculate rollover relief with partial reinvestment?

Find the proceeds not reinvested. The gain chargeable now is the lesser of that amount and the total gain. The rest of the gain is rolled over and deducted from the base cost of the new asset.

What happens to the base cost of the new asset?

For a non-depreciating asset, the rolled-over gain is deducted from the cost of the new asset. This gives a lower base cost and a larger gain on a later sale. For a depreciating asset the base cost is not reduced and the gain is held over instead.

Which assets qualify for rollover relief for a company?

The main classes are land and buildings and fixed plant and machinery, used in the company's trade. Post-April 2002 goodwill of a company falls under the intangible fixed assets regime, not the chargeable gains rules. Investment assets that are not used in the trade do not qualify.