When property is taken by an authority with compulsory purchase powers, section 247 of the Taxation of Chargeable Gains Act 1992 lets you roll the gain into replacement property bought from 12 months before to 36 months after the disposal, as long as you did not advertise the property for sale. Before working out any gain, the compensation is split: amounts for temporary loss of profits, losses on stock and revenue costs are trading income, while the payment for the property itself, goodwill and severance go into the capital gains computation.

Who counts as an authority with compulsory powers?

Section 243(5) TCGA 1992 defines an authority exercising or having compulsory powers as a person or body acquiring the property compulsorily, or who has been or could be authorised to acquire it compulsorily for the purpose for which it is acquired, or for whom someone else could be so authorised. HMRC’s Capital Gains Manual at CG61940 makes the practical point: the powers do not actually have to be used. A negotiated sale to a highway authority or a utility that could have obtained a compulsory purchase order still qualifies.

Under Statement of Practice 13/93, HMRC also treats as such an authority a sitting tenant who uses statutory rights to buy the freehold reversion or extend a lease under the Leasehold Reform Act 1967 or the Leasehold Reform, Housing and Urban Development Act 1993, or rights to buy under the Housing Acts 1985 to 1996.

There is one condition that catches people out. Both the rollover in section 247 and the small part disposal rule in section 243 are lost if you took steps, by advertising or otherwise, to make known that you were willing to sell to the authority or anyone else. For the section 243 rule, HMRC disregards any such step taken more than 3 years before the compulsory acquisition.

When is the disposal treated as made?

Timing decides which tax year the gain falls into and starts the reinvestment clock. Section 246 TCGA 1992 says that where an interest is acquired by an authority otherwise than under a contract, the disposal happens when the compensation is agreed or otherwise determined. Later variations on appeal are ignored. Where the acquisition is made under a contract, the ordinary contract date rules in section 28 apply instead (CG72101).

How is the compensation split between income and capital?

In law the compensation is one sum, even if the valuer built it up from several heads of claim. Section 245(1) TCGA 1992 allows it to be apportioned for tax, and HMRC’s Statement of Practice SP8/79, following the Court of Appeal decision in City of Stoke on Trent v Wood Mitchell, sets out the income side. CG72101 summarises the treatment:

Element of compensation Tax treatment
Value of the property taken Consideration in the capital gains computation
Temporary loss of profits Trading income
Loss on trading stock Trading income
Reimbursed revenue costs, such as removal expenses and interest Set against the related revenue expense
Incidental costs of a capital nature Set against the related capital expenditure under section 50
Loss of goodwill Capital gains tax for individuals; companies follow the intangibles or chargeable gains rules depending on when the goodwill was created
Severance or injurious affection to property you keep A part disposal of the retained property under section 245(2)

Getting this split right comes first, because only the capital elements can be rolled over. Amounts taxed as income are excluded from the gain by section 37(1). For more on where the line falls, see our guide to capital and revenue expenditure.

How does section 247 rollover work?

Section 247 is modelled on rollover relief for business assets, but it is wider in one important way: CG61900 confirms there is no requirement for the old or new property to be used in a trade. An investor whose let shop is acquired for a road scheme can reinvest in another investment property. The relief is open to individuals, trustees and companies.

The new property can be any interest in or right over real property, including buildings. It cannot be spending on new buildings, or additions to buildings, on property you already own; CG61906 says the concession that allows this for business asset rollover does not apply here.

If the whole of the consideration is reinvested and you claim, section 247(2) treats the old disposal as producing neither a gain nor a loss, and the cost of the new property is reduced by the gain. If only part is reinvested, section 247(3) limits the immediately chargeable gain to the amount not reinvested, provided that amount is less than the gain, and the rest is deducted from the new cost. Where section 247 applies, section 247(6) treats severance compensation as part of the consideration for the old property, so there is no separate deemed part disposal of the property you keep.

If the replacement is a depreciating asset, such as a lease with 60 years or less to run, the gain is held over rather than rolled into cost, under section 154 as applied by section 248(3). For this relief CG61932 notes that ceasing trade use of the new property is not a trigger.

Which replacement property is excluded?

Section 248(1) excludes a dwelling house, or part of one, if a gain on its disposal at any time in the 6 years from acquisition would be wholly or partly exempt under the private residence rules in sections 222 to 226. In plain terms, you cannot roll compensation into a home that is, or within 6 years becomes, your only or main residence. If that happens later, section 248(2) allows HMRC to withdraw the relief without regard to the normal assessment time limits. See private residence relief for how that exemption works.

What are the time limits and how do you claim?

  • Reinvestment window. Section 247(5) borrows the section 152(3) period, so the new property must be acquired, or an unconditional contract entered into, between 12 months before and 36 months after the disposal (CG60300). HMRC can extend this, and Statement of Practice D6 covers property acquired for development and leased back to the former owner until building starts, where the window can run to three years after trade use stops.
  • Provisional relief. Section 247A lets you declare in your return an intention to reinvest before you have bought anything. CG61920 says the procedure follows business asset rollover, where for individuals a declaration lapses on the third anniversary of the 31 January following the tax year of disposal, and the gain is then assessed.
  • Final claim. The general time limit applies: for individuals, 4 years from the end of the tax year of the later of the disposal and the reinvestment (CG60310).
  • No double claims. Section 248(4) stops a section 243 claim on a disposal for which section 247 relief is claimed.

What if only a small part of your holding is taken?

Where an authority takes a strip of a larger holding, section 243 lets you claim that the transfer is not a disposal at all. The compensation is instead deducted from the base cost of the whole holding, so tax is deferred until you sell the rest. The conditions are that the consideration is small compared with the market value of the whole holding immediately before, you took no steps to advertise, and your interest is not a wasting asset. The statute does not give a figure for small. CG72200 points to HMRC’s guidance at CG57835, which accepts 5 per cent or less of value and, separately, amounts of £3,000 or less.

The section 243 claim has a short deadline: for capital gains tax, by the first anniversary of the 31 January following the tax year of the transfer, which CG72200 describes as 21 months from the end of that tax year.

What does this look like in practice?

Illustration only. Priya owns a freehold workshop bought for £200,000. A council acquires it for a road scheme. Compensation of £570,000 is agreed in the 2026 to 2027 tax year: £500,000 for the property, £40,000 for temporary loss of profits and £30,000 for severance of her adjoining yard.

  1. The £40,000 for loss of profits is trading income, not part of the gain.
  2. She claims section 247, so the £30,000 severance is added to the consideration: £530,000.
  3. Ignoring costs, the gain is £530,000 less £200,000, which is £330,000.
  4. Within 36 months she buys a unit for £600,000. The whole £530,000 is reinvested, so no gain is charged now and the new unit’s base cost is £600,000 less £330,000, which is £270,000.
  5. Had the unit cost £450,000, the £80,000 not reinvested would be chargeable now, £250,000 would be rolled over and the new base cost would be £200,000.

Any gain left in charge is taxed at the capital gains tax rates for the year, after the steps in how capital gains tax is calculated.

What mistakes come up most often?

  • Putting the whole compensation figure into the gain, so trading income escapes tax and the rollover is overstated.
  • Assuming relief needs trade use. Section 247 does not, but it does need reinvestment in real property, not shares or plant.
  • Reinvesting in a house the owner later moves into within 6 years.
  • Forgetting that marketing the property before the authority approached can remove relief.
  • Missing the 21 month section 243 deadline on small part disposals.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.