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Rollover Relief or Entrepreneurs Relief?

There are two commonly used reliefs from Capital Gains Tax available when business assets are sold – Rollover Relief and Entrepreneurs’ Relief.

Business Asset Rollover Relief

Rollover Relief can be claimed when a trading business sells a business asset (asset A) and uses the proceeds to buy a new business asset (asset B). The purchase of asset B must be within 1 year prior to, or 3 years post the sale of asset A. The payment of the Capital Gains Tax (CGT) on asset A is deferred until the sale of asset B and partial relief can be claimed where only some of the proceeds are reinvested or depreciating assets are purchased. 

Assets that qualify for this relief include land and buildings and fixed plant and machinery.

Entrepreneurs’ Relief

Entrepreneurs’ Relief reduces the rate of CGT to 10% upon the disposal of a business or an asset that was used in the business before the business ceased, or before you disposed of a part of your business. To be eligible, you must meet various qualifying conditions for a 2-year period up to the date of the disposal of the asset and/or cessation of (or withdrawal from) the business – and the asset sales must take place within 3 years of the business ceasing. Entrepreneurs relief is only available to individuals (not companies) and there is a lifetime limit of £1 million on disposals that have taken place since 11 March 2020.


There is one simple but very important difference between the two reliefs that should be borne in mind when planning. Rollover Relief is a deferral of the tax liability to the time when the replacement asset is sold (and so subject to whatever CGT regime is in place at that time); there will be no initial CGT to pay as long as all the sale proceeds are reinvested – but there would be no available cash from the sale to repay debt or for personal use. Entrepreneurs’ Relief will enable 90% of the proceeds to be available as “tax paid money” – leaving the seller with absolute freedom on how to use the money and no worry about future CGT regimes.
10% is viewed as a relatively low tax rate and many would now opt to accept that level of tax burden to free up the sale proceeds and not worry about future and potentially harsher CGT regimes.

Jenny Rowe

September 2020

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