Rollover relief

Rollover relief

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We have a client who is a sole trader farmer with a significant amount of limestone sitting under part of his land, which an aggregate company wishes to extract.

He's looking at granting them a lease over the land to allow them to do so, charging a lease premium. This will be caught by the mineral rights rules and be split between income and capital.

Can he take the gain on the capital element and reinvest this in qualifying assets thereby rolling it over until they are disposed of? The legislation refers to the disposal of an interest in land as being a qualifying asset for ROR purposes. While something such as an option would be a disposal for these purposes is the granting of a lease treated in the same way?

Many thanks

Andy
Andy Gilderdale

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By kenmoody
23rd Jul 2008 13:07

I'm not totally convinced ...
... that ROR is technically available for the disposal of an interest e.g. the granting of a lease. S152 actually talks about the disposal of an asset or "his" (i.e. the trader's) interest in an asset. Note, it doesn't say "an" interest in the asset. To my mind that means that whatever the trader's interest the whole of that interest must be disposed of to qualify. Clearly the lease is not an asset which was ever owned by the trader since it only comes into existence on being granted to the lessee.

However, that doesn't seem to be the received wisdom - possibly on the basis that a disposal of an asset includes a part-disposal.

Thus I'd have to conclude that a claim should be OK, though you could apply for a COP 10 ruling if you want confirmation.

Of course the gravel was never used in the farming business, but the land under which it lies was and it is the land which is the asset. Don't have direct experience of the point though.

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