Business Asset Rollover Relief (BAR)
Business Asset Rollover Relief (BAR) is a relief that can be used to defer capital gains tax (CGT) on the gains made when you sell business assets. BAR allows you to reinvest the proceeds of the sale of business assets into new business assets, without having to pay CGT on the gains.
To qualify for BAR, you must:
Sell business assets.
Reinvest the proceeds of the sale into new business assets.
Use the new business assets in a trade or business.
Hold the new business assets for at least three years.
If you meet all of these conditions, you will be able to defer CGT on the gains made when you sell the old business assets. You will only have to pay CGT when you sell the new business assets, or when you die, whichever is sooner.
BAR can be a valuable tax relief for business owners. It can help you to grow your business without having to worry about the CGT implications of selling business assets.
How does BAR work?
BAR works by deferring the CGT that you would have to pay on the gains made when you sell business assets. When you sell business assets, you will normally have to pay CGT on the difference between the sale price and the original purchase price. However, if you reinvest the proceeds of the sale into new business assets, you can defer the CGT until you sell the new business assets.
For example, if you sell a business asset for £100,000 and the original purchase price was £50,000, you would normally have to pay CGT of £25,000. However, if you reinvest the £100,000 proceeds of the sale into a new business asset, you can defer the CGT until you sell the new business asset.
What types of assets qualify for BAR?
BAR is available for a wide range of business assets, including:
Land and buildings.
Plant and machinery.
Intangible assets, such as goodwill and patents.
Stock and work in progress.
What are the conditions for claiming BAR?
To qualify for BAR, you must meet all of the following conditions:
You must sell business assets.
You must reinvest the proceeds of the sale into new business assets.
You must use the new business assets in a trade or business.
You must hold the new business assets for at least three years.
If you do not meet all of these conditions, you will not be able to claim BAR.
What are the benefits of BAR?
BAR can offer a number of benefits for business owners, including:
It can help you to grow your business without having to worry about the CGT implications of selling business assets.
It can free up cash that you can use to invest in your business.
It can reduce your tax bill.
How to claim BAR
If you think you may be eligible for BAR, you should speak to a financial adviser. A financial adviser can help you to understand the rules of BAR and to make sure that you are claiming it correctly.
You can claim BAR by completing form CG34. You must submit this form to HM Revenue and Customs (HMRC) within four years of the end of the tax year in which you sold the old business assets.
Example
Let's say you are a sole trader who sells a business asset for £100,000. The original purchase price was £50,000. You reinvest the £100,000 proceeds of the sale into a new business asset.
You would normally have to pay CGT of £25,000 on the gains made when you sold the old business asset. However, if you claim BAR, you can defer the CGT until you sell the new business asset.
If you sell the new business asset for £150,000, you will have to pay CGT of £25,000 on the gains made when you sold the new business asset. However, the amount of CGT that you pay will be reduced by the amount of CGT that you deferred when you sold the old business asset.
In this example, you would only have to pay CGT of £10,000 on the gains made when you sold the new business asset.
Conclusion
BAR can be a valuable tax relief for business owners. It can help you to grow your business without having to worry about the CGT implications of selling business assets.
This must probably be an overload of information , feel free to come and visit in , walk ins allowed and we shall be more than happy to help you navigate this relief and maximise your benefits.