Advanced Taxation (UK) · Corporation tax: the use of exemptions and reliefs in deferring and minimising corporation tax liabilities

Company Rollover Relief and Substantial Shareholding Exemption

Updated 11 October 2026 · Fact-checked

A company's chargeable gain is proceeds less cost, with indexation allowance frozen at December 2017, taxed at corporation tax rates. Rollover relief defers the gain when sale proceeds are reinvested in qualifying business assets. The substantial shareholding exemption removes the gain or loss entirely on sales of qualifying shareholdings.

Understand Chargeable Gains for Companies: Rollover and Substantial Shareholding

A company pays corporation tax on its chargeable gains. There is no annual exempt amount and no separate capital gains rate. The gain is added to the company's profits and taxed at the corporation tax rates in the tax tables (small profits rate 19%, main rate 25%, with marginal relief between the limits).

The gain is proceeds less allowable costs. Companies also used to get indexation allowance, which stopped accruing after December 2017. You still deduct it for assets held before then. It can reduce a gain to nil but cannot create or increase a loss.

Rollover relief defers a gain. If a company sells a qualifying business asset and buys another qualifying asset within the reinvestment window, the gain is deducted from the cost of the new asset. Tax is deferred until the new asset is sold, unless it is rolled over again. The window runs from one year before to three years after the disposal. Both assets must be used in the trade. Qualifying classes include land and buildings and fixed plant and machinery. Goodwill is a common trap. For a company, goodwill acquired after 1 April 2002 is dealt with under the intangible fixed asset regime and is not within rollover relief. Goodwill acquired before that date can still qualify. Check the acquisition date.

Substantial shareholding exemption (SSE) works differently. It is not a deferral. If the conditions are met, the gain is exempt and any loss is not allowable. The investing company must have held at least 10% of the ordinary share capital of the investee for a continuous 12-month period beginning not more than six years before the day of disposal. Other conditions apply to the investing company and the investee, and the investee must generally be a trading company or the holding company of a trading group. Check the facts given. If SSE applies, you cannot choose to use rollover relief on that sale because there is no gain.

Holdover relief (gift relief) is a different relief. It applies to gifts of business assets and is available only to individuals (and trustees). It is not available to companies. Do not mix the two up.

Key rules to remember

Company chargeable gain: Proceeds − allowable costs − indexation allowance (frozen to December 2017) = chargeable gain; Indexation can reduce a gain to nil but cannot create or increase a loss. Indexation after December 2017 is not given.
Indexation allowance: Indexation factor × cost (and enhancement expenditure, from its own date); The factor is given in the question. Calculate to three decimal places if you work it out. The factor runs only up to December 2017.
Rollover relief, full claim: Gain rolled over = chargeable gain; new asset base cost = cost − gain rolled over; Applies if all the proceeds are reinvested. Reinvestment window: one year before to three years after the disposal.
Rollover relief, partial reinvestment: Gain immediately chargeable = lower of (proceeds not reinvested) and (total gain); The balance of the gain is rolled over and deducted from the new asset's cost.
Substantial shareholding exemption: Holding ≥ 10% of ordinary share capital, held for a continuous 12-month period beginning not more than 6 years before the day of disposal; If all conditions are met, the gain is exempt and a loss is not allowable.
Corporation tax on gains: Gain added to taxable total profits; rates and marginal relief from the tax tables; Main rate 25%, small profits rate 19%, limits £50,000 and £250,000, standard fraction 3/200. No annual exempt amount for companies.

How to solve Chargeable Gains for Companies: Rollover and Substantial Shareholding questions

Use the same order for every company gains question. It stops you missing a relief and keeps the workings easy to mark.

1Identify the asset and the disposal. Check whether it is shares, land, plant or goodwill, and note the dates.
2Test SSE first if shares are sold. Check the 10% holding, the continuous 12-month period beginning not more than six years before the disposal, and the trading status conditions. If met, state the gain or loss is exempt and stop.
3Compute the gain: proceeds less cost and enhancement costs, then deduct indexation allowance up to December 2017 if the asset was held then. Do not let indexation create a loss.
4If a qualifying business asset is sold, check rollover relief. Test the asset classes, use in the trade and the reinvestment window of one year before to three years after.
5Work out the proceeds not reinvested. This is the amount immediately chargeable, limited to the total gain. Deduct it from the total gain to find the gain rolled over.
6Compute the base cost of the new asset: cost less the gain rolled over. Note the deferred gain becomes chargeable when the new asset is sold.
7Add the chargeable gain to taxable total profits and apply the corporation tax rates, considering marginal relief if profits are between the limits.
8Give a short comment on the planning point, such as the timing of the claim, any cash flow benefit and the risk if the asset is not reinvested in time.

Quickest way: Three-question triage

When to use it: Use this when time is short and the question mixes shares and business assets.

Shares sold? Ask: 10% holding, 12 months, trading company. If yes, the gain is exempt.
Business asset sold? Ask: qualifying class, used in the trade, reinvested within one year before to three years after. If yes, roll over.
Compute the gain once only. Put the indexation line in a separate line so you earn method marks even if a number slips.
Work out reinvestment shortfall: proceeds − reinvestment. The chargeable gain is the lower of this and the gain.
Finish with the tax effect using the tax table rate.

Common mistakes in Chargeable Gains for Companies: Rollover and Substantial Shareholding

Giving indexation allowance after December 2017.
Students remember indexation but forget it was frozen.
Fix: Apply the indexation factor given in the question only. Do not extend it to the disposal date.
Letting indexation allowance create or increase a loss.
Students treat it like a normal cost.
Fix: Cap indexation at the amount that reduces the gain to nil.
Claiming rollover relief for post-April 2002 goodwill or for assets not used in the trade.
Students treat all goodwill alike, and forget that for companies the acquisition date matters.
Fix: Check the asset class and trade use for both the old and new asset. Goodwill acquired after 1 April 2002 is within the intangible fixed asset regime, so it is outside rollover relief. Pre-April 2002 goodwill can still qualify.
Rolling over the whole gain when only part of the proceeds are reinvested.
Students forget the proceeds test.
Fix: Immediately chargeable gain is the lower of the gain and the unreinvested proceeds. Roll over the rest.
Using the annual exempt amount or the individual CGT rates for a company.
The CGT tables are on the same page as corporation tax.
Fix: Companies have no annual exempt amount. Tax the gain at corporation tax rates.
Missing SSE conditions and computing a gain anyway.
Students jump straight into computation.
Fix: Test SSE first and write each condition. If it applies, state the gain is exempt and any loss is not allowable.

Worked examples

Example 1

Alder Ltd sold a factory used in its trade for £900,000 in September 2026. It cost £400,000 in June 2012. The indexation factor to December 2017 is 0.150. In November 2026 it bought a replacement factory for £780,000. Compute the chargeable gain, the amount of gain rolled over and the base cost of the new factory, assuming a claim is made.

Show the solution

Gain before indexation: £900,000 − £400,000 = £500,000.
Indexation: £400,000 × 0.150 = £60,000.
Chargeable gain before rollover: £500,000 − £60,000 = £440,000.
Proceeds not reinvested: £900,000 − £780,000 = £120,000.
Immediately chargeable gain is the lower of £120,000 and £440,000, so £120,000.
Gain rolled over: £440,000 − £120,000 = £320,000.
Base cost of the new factory: £780,000 − £320,000 = £460,000.

Answer: Chargeable gain £440,000; immediately chargeable £120,000; rolled over £320,000; new factory base cost £460,000.

Example 2

Birch Ltd sold its 30% holding in the ordinary shares of Cedar Ltd, a trading company, for £750,000 in October 2026. It had held the shares since 2019. The shares cost £500,000. Birch Ltd is a trading company. Explain the tax treatment and state the chargeable gain.

Show the solution

Test SSE. Holding is 30%, which is at least 10%.
The shares were held from 2019, so they were held for a continuous 12-month period that began not more than six years before the day of sale.
Cedar Ltd is a trading company and Birch Ltd is a trading company, so the trading conditions are met.
All conditions are met, so SSE applies and the gain is exempt.
The gain that would otherwise arise is £750,000 − £500,000 = £250,000, but it is not chargeable.
Rollover relief is not needed because there is no gain to defer.

Answer: The £250,000 gain is exempt under SSE, so the chargeable gain is nil. Any loss on such a sale would not be allowable.

Exam tips

Test SSE before you compute any share gain. It saves time and it is a favourite examiner trap.
State each condition in your answer. Marks are given for each condition tested, not only for the conclusion.
Show the indexation working on its own line. Mention that it is frozen at December 2017.
In rollover questions, write the dates and show the reinvestment window in your answer. Late purchases lose the relief.
Add a short planning comment, such as deferring the tax cash outflow and the risk if reinvestment is delayed. This earns professional skills marks.

Practice questions from Corporation tax: the use of exemptions and reliefs in deferring and minimising corporation tax liabilities

Chargeable Gains for Companies: Rollover and Substantial Shareholding 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 SkillsSubstantial Shareholding Exemption

Chargeable Gains for Companies: Rollover and Substantial Shareholding: frequently asked questions

What are the conditions for the substantial shareholding exemption?

The investing company must hold at least 10% of the ordinary share capital of the investee for a continuous 12-month period beginning not more than six years before the day of disposal. The investing company and the investee must also meet trading conditions. If they are met, the gain is exempt and a loss is not allowable.

How does rollover relief work for companies in the UK?

If a company sells a qualifying business asset and reinvests the proceeds in another qualifying asset within one year before to three years after, the gain is deducted from the cost of the new asset. Tax is deferred until the new asset is sold. If only part of the proceeds is reinvested, the unreinvested amount is taxed now, up to the gain.

What is the difference between rollover relief and holdover relief?

Rollover relief defers a gain when sale proceeds are reinvested in a new business asset. Holdover relief (gift relief) defers a gain when a business asset is given away, and the recipient takes over the donor's base cost reduced by the gain. Gift relief is available only to individuals (and trustees), not companies. They apply in different situations.

Do companies get an annual exempt amount or indexation allowance?

Companies get no annual exempt amount. Indexation allowance is still deducted for periods up to December 2017, but it stopped accruing after that date. It can reduce a gain to nil but cannot create a loss.