What is Holdover (Gift) Relief? When does it apply? What are the conditions?

Subscribers, see CGT: Holdover/Gift Relief for your detailed version of this guide.

This is a freeview 'At a glance' guide to Capital Gains Tax (CGT) Holdover or 'Gift' Relief. 

At a glance

This relief reduces the taxable gain on gifts of assets when certain conditions are met.

  • The general rule for CGT is that gifts are treated for tax as being made as market value.
  • A gift is the outright transfer of an asset for little or no cash or other consideration. 
  • When you make a gift, you are treated as making a disposal for CGT purposes. 
    • The disposal proceeds are the market value of the asset at the time of the gift.
    • You can Deduct your cost of acquiring and enhancing your asset from the proceeds.

Without special reliefs for giving, when you make a gift you may well be subject to Capital Gains Tax.

Holdover or 'Gift' Relief

Holdover Relief is available when an individual or the trustees of a settlement make a Gift of a capital asset to another person. 

The effect is that you, as the donor (person making the gift), do not pay any tax on disposing of the asset, but instead you pass on the gain to the donee (person receiving the gift) and this is deducted from their base cost.

There are two forms of Holdover Relief permitted under the Taxation of Chargeable Gains Act 1992 (TCGA 1992):

  • S.165 applies to gifts of business assets.
  • S.260 applies to gifts of business and non-business assets that are transfers immediately chargeable to Inheritance Tax (IHT).

S.260 takes priority, so where both apply, relief must be claimed under s.260 rather than s.165.

Qualifying assets for s.165 Holdover Relief

  1. An asset or an interest in an asset used for the purposes of a trade, profession or vocation carried on by:
    • The donor.
    • The donor's personal company.
    • The trustees of a settlement or a beneficiary with a life interest in the trust.
  1. Shares or securities in either an unlisted company or personal company that is:
    • A trading company or a holding company of a trading group.
  2. Transfers of agricultural property.
  3. UK land under the Non-resident CGT regime.

Restrictions on Holdover Relief

Holdover Relief does not apply to:

  • Gifts made to non-residents or non-resident companies under the control of persons who are not liable to UK CGT. 
  • A gift of shares or securities made to a company.

Holdover Relief under s.165 can be restricted:

  • On the gift of an asset if it has not been used for trade purposes throughout the entire period it was held by the donor.
  • On the gift of a building or structure which is partly used for trading purposes and partly used for non-trading purposes.
  • On the gift of shares if the company holds assets not used for trade purposes.
  • If the gift is partial and not outright, for example where some consideration has been given but it is less than the market value of the asset. 

Qualifying assets for s.260 Holdover Relief

S.260 applies to qualifying disposals which can include both CGT business and non-business assets, including:

  • Transfers immediately chargeable to Inheritance Tax (IHT), such as the transfer of an asset into a non-settlor interested trust.
  • IHT exempt transfers.

S.260 does not apply to certain transfers, see CGT: Holdover/Gift Relief for when the relief will not apply.

How to claim Holdover Relief?

See CGT: Holdover/Gift Relief for how to make a claim and what the time limits are.

Useful guides on CGT reliefs:

CGT: Holdover/Gift Relief
Holdover relief is available when an individual makes a gift to another person (individual or company). When is the relief available? What are the conditions that apply? What restrictions are there?

CGT: reliefs, disposal of a business or its assets
Which Capital Gains Tax (CGT) reliefs apply when a person replaces or disposes of an asset used by a business, the whole or part of a business, or shares in a company?

See also An index to Capital Gains Tax reliefs for other reliefs that might apply to gifts.

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