Rollover At Your Peril

For farmers and landowners selling land, buildings or other qualifying business assets, it has long seemed attractive and sensible to look at a way of deferring any painful tax liability. Rollover Relief is one mechanism to defer such a taxable gain by simply reinvesting the money into a new business asset.

The benefits . . .

The logic, on the face of it, is sound. A farmer who is intending to reinvest funds from an asset sale will have more money to plough into the new business asset if they don’t have to hand over a chunk of it to the Taxman. When Capital Gains Tax rates are high this is certainly a route to be seriously explored.

Is it the right time . . .

We are currently enjoying Capital Gains Tax rates which are at historically low levels. A farmer can currently expect to pay the Taxman a maximum of 18% on any capital profit and, in certain circumstances, a rate as low as 10% can be secured with good planning. There are however two key issues to consider before signing a Rollover Relief claim.

Considerations . . .

Firstly, to defer the entire taxable gain, the whole of the sale proceeds must be reinvested into the new business asset.

Secondly, Rollover Relief simply defers the tax liability, it doesn’t make it disappear. Here lies the problem! The farmer or landowner, when deferring the gain, does not know what the prevailing Capital Gains Tax rate will be when it is finally taxed.

Planning is essential . . .

Farmers and landowners making Capital Gains on the sale of assets should think long and hard before taking the decision to apply for Rollover Relief. Our dedicated team of tax consultants and financial planners will be able to provide advice on these matters.

For further information, please contact

Adrian Pearce

Email: adrianpearce@spofforths.co.uk

Phone: 01243 787 627

www.spofforths.co.uk

Offices in Brighton, Chichester, Horsham, Storrington and Worthing.