A freeview guide to Capital Gains Tax (CGT) Holdover or “Gift” Relief. 

Subscribers, see CGT reliefs: disposal of a business or its assets for your detailed version of this guide.

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 tax 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 on it.

Hold-over or "gift" relief

Hold-over 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 giver, 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 hold-over relief permitted under the taxation of capital gains act (TCGA 1992):

  • S165 applies to gifts of business assets.
  • S260 applies to gifts of business and non-business assets that are transfers immediately chargeable to IHT.

S260 takes priority, so where both apply, relief must be claimed under s260.

Qualifying assets for s165 hold-over 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 an unlisted personal company that is a trading company or holding company of a trading group.
  2. Transfers of agricultural property
  3. Residential property under the Non-resident CGT regime.

Restrictions on hold-over relief

Hold over 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.

Hold over relief under s165 can be restricted:

  • On the gift of an asset if it has not been used for trade purposes throughout the period it was held by the donor (giver).
  • On the gift of a building or structure which is partly used for trade and partly not used for trade.
  • 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 s260 hold-over relief

S260 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 trust.
  • IHT exempt transfers.

S260 does not apply to certain transfers, see CGT reliefs: disposal of a business or its assets for when the relief will not apply.

How to claim hold-over relief?

See CGT reliefs: disposal of a business or its assets for how to make a claim and what the time limits are.

Links to our other useful guides on CGT relief:

CGT reliefs: disposal of a business or its assets

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


 

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