Rollover Relief on CGT
In the widest sense of the term a roll-over is a method for deferring a capital gain or loss. The deferral mechanism can take a variety of forms. Sometimes the disposing party disregards the capital gain or loss and the acquiring party simply steps into the shoes of the disposing party with regard to the details of the asset, such as date of acquisition, dates of incurral of expenditure, amount of expenditure and market value on valuation date. This is the classic roll-over under which the details of the asset are “rolled over” to another person. Examples include the roll-over between spouses and intra-group transactions between companies within the same group of companies.
In other situations a capital gain may be determined at the time of disposal and only brought to account when the replacement asset is disposed of or it may be recognised in instalments over the life of the replacement asset. In yet other cases the capital gain may be deducted from the base cost of the replacement asset. Sometimes the deferral will only apply to a capital gain while in other cases it will apply to capital gains and losses.
Some examples of roll-overs include the following:
1. Involuntary disposal of certain assets under certain circumstances (Para. 65)
2. Reinvestment in replacement assets, under certain conditions (Para. 66)
3. Transfer of assets between spouses (Para. 67)
4. A compulsory sale of listed shares followed by a repurchase of identical shares (para 42A)
5. Roll-overs are also provided for in the corporate restructuring rules contained in sections 41 – 47 of the Income Tax Act. These include asset-for-share transactions, amalgamation transactions, intra-group transactions, unbundling transactions and liquidation distributions.
Corporate Transactions
Tax relief exists for certain transactions. These are:
• Asset for share transactions
• Amalgamation and unbundling transactions
• Intra-group transactions
• Liquidation, winding up or deregistration transactions within a group. This relief also applies to transactions involving specific CFC’s.
Re-investment reliefs
Taxpayers can defer taxable recoupments and capital gains on the sale of business assets (excluding buildings) if they fully reinvest the sale proceeds in other qualifying assets within a period of three years. Tax on the recoupment and capital gain upon the disposal of the old asset is spread over the same period as wear and tear may be claimed for the replacement asset.
VAT reliefs for developers
As from 10 January 2012, property developers who let residential property prior to a sale are granted temporary relief from the VAT change in use rules. The relief applies for a maximum period of 36 months if the developer is unable to sell the
property due to a lack of demand. If the rental period exceeds 36 months, the deemed change in use will apply, based on the market value of the property on that date. The concession ceases to apply on 1 January 2015.
VAT relief on inter-group
As from 10 January 2012, group debt older than 12 months is not be subject to the VAT charge back provision and the group creditor is not be entitled to claim a VAT input deduction for a bad debt written off.
Voluntary disclosure reliefs
The new Tax Administration Act introduces an ongoing Voluntary Disclosure Programme formalising pre and post audit notification voluntary disclosures. The new relief will only be in respect of penalties (excluding late submission),
additional tax and criminal prosecution but not interest and foreign exchange contraventions.