Claiming Rollover relief on overseas property
Rollover relief allows you to defer the gain arising on a 'business asset' when you reinvest the proceeds in further business assets within a period of three years after the disposal (or one year before the disposal).
The key point here is that it only applies to business assets. Business assets are similar to the taper relief definition, and renting out an overseas residential property would be an investment as opposed to a trading activity. The main categories of business assets that would qualify are:
- land and property
- fixed plant and machinery However they would need to be used for the purposes of a trade carried on by you. In other words you would usually need to own a business overseas that the property was carried on from. This could be a bar, restaurant, shop, office or something else. Providing you satiasfy this requirement you can then defer the gains arising on these 'qualifying business assets' wherever the property (asset) is located. Example Paul owns a UK factory and disposes of this for £1,000,000 at a gain of £500,000 in June 2007. Rather than pay the CGT arising he reinvests the full £1,000,000 in Bulgarian trading enterprises costing £1,500,000. The UK gain of £1,000,000 is deferred by 'rolling over' the gain against the Bulgarian purchases,and for UK tax purposes the Bulgarian assets will then have a base cost of £500,000, not £1,500,000. This means that on a future disposal of the Bulgarian property the gain arising will be £1,000,000 greater. If you were considering buying and selling a number of properties you could even consider forming a property trading business, based overseas, run from the overseas premises. The acquisition of the premises would then be a qualifying asset for rollover relief purposes. You may be able to claim main residence relief on the overseas property though. Check out this article which looks at when you can and can't claim it.
- fixed plant and machinery However they would need to be used for the purposes of a trade carried on by you. In other words you would usually need to own a business overseas that the property was carried on from. This could be a bar, restaurant, shop, office or something else. Providing you satiasfy this requirement you can then defer the gains arising on these 'qualifying business assets' wherever the property (asset) is located. Example Paul owns a UK factory and disposes of this for £1,000,000 at a gain of £500,000 in June 2007. Rather than pay the CGT arising he reinvests the full £1,000,000 in Bulgarian trading enterprises costing £1,500,000. The UK gain of £1,000,000 is deferred by 'rolling over' the gain against the Bulgarian purchases,and for UK tax purposes the Bulgarian assets will then have a base cost of £500,000, not £1,500,000. This means that on a future disposal of the Bulgarian property the gain arising will be £1,000,000 greater. If you were considering buying and selling a number of properties you could even consider forming a property trading business, based overseas, run from the overseas premises. The acquisition of the premises would then be a qualifying asset for rollover relief purposes. You may be able to claim main residence relief on the overseas property though. Check out this article which looks at when you can and can't claim it.