If you reinvest the proceeds of a business asset in a depreciating asset, which means fixed plant or machinery or any asset with a life of 60 years or less, the gain is not rolled into the cost of the new asset. Under section 154 of the Taxation of Chargeable Gains Act 1992 it is frozen and comes back into charge on the earliest of selling the new asset, ceasing to use it in the trade, or ten years after buying it. You can avoid that charge by buying a non depreciating asset before the trigger and switching the claim to it.

What counts as a depreciating asset?

Section 154(7) says an asset is depreciating if it is a wasting asset, or will become one within ten years. A wasting asset is one with a predictable life of 50 years or less (section 44(1)). Putting those together, HMRC describes a depreciating asset as one with a maximum life expectancy of 60 years or less from when it is acquired (CG60295; helpsheet HS290, section 11). In practice:

  • Fixed plant and machinery is always depreciating, because section 44(1)(c) treats all plant and machinery as having a life of less than 50 years.
  • Leases are depreciating if 60 years or less remain when acquired.
  • Freehold property is never a wasting asset (section 44(1)(a)), so it is never depreciating.
  • Buildings take their life from the tenure of the site they stand on. A building put up on a leasehold site is depreciating if 60 years or less of the lease remain when the building is completed. A building on freehold can still be depreciating if its own expected life is under 60 years, for example because a planning condition limits it (CG60295).

Only fixed plant qualifies at all; mobile equipment such as a lorry is outside rollover relief (HS290, section 7).

How is the relief given differently?

Normal rollover relief reduces the base cost of the new asset by the gain, so the gain is taxed only when the new asset is sold. Section 154(2) changes this when the new asset is depreciating. The gain is not carried forward. Instead, the claimant is treated as if the gain did not accrue until the earliest of:

  1. disposing of the new asset;
  2. ceasing to use it for the purposes of a trade carried on by the claimant; or
  3. the end of ten years beginning with its acquisition.

The new asset keeps its full cost (CG60295). The deferred gain is the original gain, so it does not grow or shrink with the value of the new asset. When a trigger happens, the gain is treated as accruing then, and HMRC expects it to be self assessed (CG60295). It is then taxed at the capital gains tax rates for that year.

What triggers the deferred gain?

  • Sale or other disposal of the depreciating asset, including assigning a lease. The gain on the lease itself is worked out separately under the short lease rules; see assigning a short lease.
  • Ceasing to use it in the trade. Because section 152(8) treats several trades carried on by the same person as one trade, moving the asset to another of your trades is not a trigger.
  • The tenth anniversary of acquisition, even if the asset is still in use.

Death is not a trigger. If the asset stops being used because the claimant dies, HMRC does not treat that as an occasion of charge (CG60295). Special rules apply within groups of companies (CG45945).

Can the gain be moved into a non depreciating asset?

Yes. Section 154(4) and (5) allow the claimant, before a trigger occurs, to buy a non depreciating asset (asset No 3) and claim rollover relief into it. The earlier claim is treated as withdrawn and the gain is rolled into asset No 3 in the normal way. HMRC sets out the rules at CG60295:

  • asset No 3 is treated as bought within the reinvestment window, even if it was bought years after the original sale;
  • the new claim must be made within the normal four year time limit;
  • the gain that can be rolled over cannot exceed the gain that was held over; and
  • under section 154(6), if only part can be carried forward, the gain can be split, with part rolled into asset No 3 and the rest still held over against the depreciating asset.

This is the main planning point. A trader who has to buy plant now can preserve the deferral by buying freehold premises later, provided it happens before the trigger.

How does partial reinvestment work?

If the depreciating asset costs less than the proceeds of the old asset, section 153 applies. The part of the gain equal to the proceeds not reinvested (or the whole gain, if lower) is taxed now; the rest is held over. HMRC’s example at CG60295: Dan sells a freehold shop in March 2022 for £200,000, making a gain of £60,000. In 2024 he buys fixed machinery for £180,000. The £20,000 not reinvested is taxed in 2021 to 2022 and £40,000 is held over. In February 2026, while still using the machinery, he buys a freehold shop for £260,000. He can roll the £40,000 into it, reducing its cost to £220,000. The 2021 to 2022 charge is not affected.

What if you buy a building and its site separately?

For rollover relief a building and the ground under it are separate assets, but their lives interact (HS290, section 11):

  • Taking a 25 year lease of a site and building a factory on it makes both depreciating, because the factory’s life is limited by the lease.
  • Buying a freehold site and building a factory with an expected life of 35 years means the site is not depreciating but the factory is. You can roll the gain into the site, hold it over against the factory, or split it between the two.

Allocating as much of the gain as possible to the freehold element gives permanent rollover rather than a ten year deferral.

How does it work with numbers?

Illustration only. Mia sells her freehold workshop in June 2026 for £300,000, with a gain of £80,000. In August 2026 she spends £320,000 on fixed machinery for the trade and claims relief.

  • The machinery keeps its cost of £320,000. The £80,000 gain is held over until the earliest of her selling the machinery, ceasing to use it in her trade, or August 2036.
  • In 2030 she buys a freehold unit for £350,000 while still using the machinery. She claims under section 154(4). The £80,000 is rolled into the unit, whose base cost becomes £270,000. The ten year deadline no longer applies.
  • If she had not bought the unit and had sold the machinery in 2031, the £80,000 would have been treated as accruing in the 2031 to 2032 tax year, separately from any gain or loss on the machinery itself.

What mistakes come up?

  • Deducting the gain from the cost of a depreciating asset, which overstates any future gain on it and understates the deferred gain.
  • Not diarising the ten year date and failing to self assess the gain when it arrives.
  • Assuming a long lease is safe. A lease with 60 years or less left when acquired is depreciating.
  • Forgetting that a later purchase of a non depreciating asset can rescue the deferral, but only before a trigger.
  • Claiming for moveable equipment, which is not in a qualifying class at all.

If the replacement has not yet been bought, see provisional rollover relief claims.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.