Last updated: 16 October 2026
The question
Some years ago I sold my city centre property and moved my business to a converted farmhouse with workshops. The gain on the city property was rolled over into the workshops. If I now let my surplus workshops, will I have to pay tax on the gain?
How rollover relief works
Business asset rollover relief lets you defer capital gains tax (CGT) when you sell a business asset, such as land or buildings used in your trade, and reinvest the proceeds in new business assets within one year before or three years after the sale. The gain is not taxed at the time. Instead, it reduces the base cost of the new asset. The deferred gain becomes taxable when you sell the new asset, unless you roll it over again.
Does letting the workshops trigger tax?
Letting surplus workshops does not by itself trigger the rolled-over gain. Rollover relief for land and buildings works by reducing the base cost, and there is generally no clawback simply because the use of the asset later changes. However, the letting affects other reliefs:
| Relief | Effect of letting |
| Further rollover relief on sale | Only the part used in your trade qualifies |
| Business Asset Disposal Relief | Let property is not normally a trading asset, so BADR is unlikely on the let part |
| Business Property Relief for IHT | Let property is usually an investment, so BPR is not available |
| Rent | Taxable as property income |
Worked example
In 2001 a business sold premises for a gain of £200,000 and rolled it into workshops costing £500,000, giving a base cost of £300,000. The workshops are sold in 2026/27 for £900,000. The gain is £600,000, which includes the £200,000 deferred gain. If one third of the workshops had been let for the final years, the trading and let parts may need to be apportioned when considering further relief or BADR. CGT rates are 18% and 24% in 2026/27, and BADR gives 18% on up to £1 million of lifetime gains where it applies.
Depreciating assets
If you rolled a gain into a depreciating asset, such as fixed plant or a lease of 60 years or less, the gain is only held over, not rolled over. It becomes taxable after 10 years, or earlier if the asset is sold or stops being used in the trade. Letting such an asset could therefore trigger the held-over gain.
Planning points
- Keep records of the original rollover claim and the base cost adjustment.
- Consider whether letting is short term; returning the space to trade use before sale can help BADR in some cases.
- Look at incorporating or reinvesting to roll the gain over again.
- Review IHT, as let property loses BPR.
Frequently asked questions
Can I roll over a gain into residential property?
Only if it is used in a trade, such as a furnished holiday let before April 2025. Ordinary buy-to-let does not qualify.
What is the time limit to claim rollover relief?
Four years from the end of the tax year of the later of the sale and the purchase.
Does partial reinvestment count?
Yes, but only part of the gain is rolled over.
Do companies get rollover relief?
Yes, for land and buildings, though not for goodwill acquired after 2002.
Related: CGT rollover on property, BADR on a property sale and CGT rates.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with business property and capital gains tax. See our small business accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
