Sale of business agreement with rollover provisions

Comprehensive sale of business agreement with rollover provisions. A postponement of capital gains tax given to a business which reinvests the proceeds of the sale of an asset on which a gain is made. Without rollover relief businesses would have a powerful disincentive to replacing such assets.

The following should be noted with respect to replacement assets:

? The maximum net roll-over amount which may be allocated to each nominated replacement asset is equal to the cost base of the replacement asset.

? The replacement asset must be an active asset acquired by the taxpayer within one year before and two years after the last disposal of a roll-over asset in the income year.

? Where the replacement asset is a depreciable asset special rules apply and depreciable plant and equipment are no longer CGT assets after 21 September 1999 and so cannot constitute a replacement asset.

? If there is a net roll-over amount for the income year and the taxpayer does not nominate any replacement assets for that year or the net roll-over amount cannot be further allocated to replacement assets, then the net roll-over amount will be a capital gain to the taxpayer.

Sample

"A. The Vendor conducts the Business situate at ?BusinessAddress? and is the beneficial owner of the Assets.

B. The Vendor has agreed to sell to the Purchaser and the Purchaser has agreed to buy the Business on the terms and conditions contained in this Agreement.

1. AGREEMENT FOR SALE AND PURCHASE OF THE BUSINESS

1.1 Sale and purchase

The Vendor as beneficial owner agrees to sell to the Purchaser and the Purchaser agrees to buy from the Vendor the Business and the Assets:

1.1.1 for the Purchase Price;

1.1.2 free from any Encumbrance;

1.1.3 with effect from Completion; and

1.1.4 on the other terms and conditions contained in this Agreement."