Rollover relief on capital gains

Gains from the sale of land and buildings and freshwater shipping need not be
taken to income immediately, but may be deducted from the cost of purchasing
replacement assets in the same or in the previous year. Alternatively, the gain
may be carried forward and be deducted from the purchase price of
replacements acquired during the following four years or from the construction
costs of a building erected during the following six.

This reserve may be released back to taxable income at any time, but the release triggers additional
taxable income of 6% of the amount released, for each year in which the reserve
was carried. The release and uplift to taxable income are compulsory at the end
of the fourth year, unless construction on a new building has already started.
The effect of this rollover relief provision is to defer the taxation of a gain on
sale by deducting it from the acquisition costs of replacement assets and
thereby reducing their amortisation basis.

The reserve is often referred to as a
“6b reserve” after its governing section in the Income Tax Act.