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To illustrate the rules described in CIRD20290

Example 1 - hybrid relief: proceeds fully reinvested

Assume that a company disposes of goodwill (which in this case is not a chargeable intangible asset within CTA09/PART8) on 1 January 2003. The disposal proceeds are 拢100,000 and the capital gain 拢30,000. The company purchases land and buildings for 拢80,000 on 1 February 2002 and a patent (from an unrelated party) for 拢50,000 on 1 January 2004. It claims both CG roll-over relief and CTA09/PART 8 reinvestment relief.

The company must choose how to allocate the proceeds from the disposal between the two assets acquired. If, say, it allocates 拢80,000 to the land and buildings and 拢20,000 to the patent the gain the acquisition cost of the two assets is reduced in proportion.

Land and buildings	Formula
Gain reinvested	拢80,000 / 拢100,000 x 拢30,000 = 拢24,000
Reduced acquisition cost	拢80,000 - 拢24,000 = 拢56,000
Patent	-
Gain reinvested	拢20,000 / 拢100,000 x 拢30,000 = 拢6,000
Reduced acquisition cost	拢20,000 - 拢6,000 = 拢14,000

Example 2 - hybrid relief: proceeds only partly reinvested

Assume that the land and buildings in Example 1 cost 拢60,000 and 拢20,000 respectively so that the total expenditure on new assets is (in total) only 拢80,000.

As the total reinvestment stands at 拢80,000 out of the disposal proceeds of 拢100,000, the 拢20,000 not reinvested is deducted from the gain leaving 拢10,000 eligible for relief (see CIRD20240).

Again the company must allocate the proceeds between the two assets. If, say, it allocates 拢60,000 to the land and buildings and 拢20,000 to the patent the reduction in the gain and in the acquisition cost of the two assets is as below.

Land and buildings	Formula
Gain reinvested	拢60,000 / 拢80,000 x 拢10,000 = 拢7,500
Reduced acquisition cost	拢60,000 - 拢7,500 = 拢52,500
Patent	听
Gain reinvested:	拢20,000 / 拢80,000 x 拢10,000 = 拢2,500
Reduced acquisition cost	拢20,000 - 拢2,500 = 拢17,500