Budget 2014 – Chargeable gains roll-over relief: reinvestment in intangible fixed asset

When relief for intangibles was introduced for companies with effect from 1 April 2002, the legislation contained in Schedule 29 Finance Act 2002, withdrew capital gains tax roll-over relief on the disposal of tangible assets where the proceeds were reinvested in replacement intangible assets.

Schedule 29 was rewritten as part of the Tax Law Rewrite project, inserting section 156ZB into TCGA 1992. In so doing, the rewrite introduced a potential anomaly, with the result that a gain in respect of a tangible asset could be rolled into an intangible asset. This was not the intention when the legislation was introduced.

The current rules in Part 8 CTA 2009, which deal with intangible assets for corporation tax purposes, do not provide for an adjustment to the base cost of the asset where there is a roll-over claim in respect of the disposal of a tangible asset because this type of claim was not intended.

This means that relief could be given twice, once when capital gains roll-over relief is claimed under the capital gains regime, and again when the expenditure on the new asset is relieved under the corporation tax intangible assets regime.

Section 156ZB will be amended to bring the corporation tax treatment of roll-over relief into line with the original intention when the legislation was introduced in 2002. This will take effect from 19 March 2014.

Furthermore, the measure reduces the tax cost of the replacement intangible asset by the amount of the gain rolled over for claims made between 1 April 2009 and 18 March 2014. This prevents double relief being given for any roll-over relief claims already made, as the amortisation claimed on the new intangible asset will be restricted to the cost reduced by the rolled-over gain.

This amendment will ensure that the roll-over relief provisions operate as originally intended so that companies cannot roll over the gain on tangible assets into new intangible fixed assets.