Commentary

C3.503 Holdover relief for gifts of business assets—calculating and claiming relief

Capital gains tax
Capital gains tax | Commentary

C3.503 Holdover relief for gifts of business assets—calculating and claiming relief

Capital gains tax | Commentary

C3.503 Holdover relief for gifts of business assets—calculating and claiming relief

Calculating holdover relief on gifts of business assets

The holdover relief for business assets applies to disposals otherwise than by way of bargains at arm's length1, so it is available in respect of both gifts and transfers at undervalue.

Subject to the restrictions described in C3.504, if no consideration is received for the disposal, or the consideration received is less than the transferor's allowable expenditure2 (see C2.201), the full amount of the gain that would otherwise have been chargeable may be held over. In other words, no chargeable gain arises at the time of the disposal, but the amount of the gain that would have been chargeable but for the relief (ie the held-over gain) is deducted from the transferee's base cost3. The held-over gain is therefore automatically brought into the capital gains computation on any subsequent disposal of the asset by the transferee.

If the consideration received exceeds the transferor's allowable expenditure on the asset, the amount of the gain that may be held over is reduced by the amount of that excess4. The amount of the held-over gain is deducted from the transferee's base cost5.

Example 1

AB bought shares in an unquoted trading company in December 2003 for £40,000. He gifted them to his son CD in November 2013 when they were worth £200,000. CD then sold them for £250,000 in December 2019. AB and CD made a claim for holdover relief under TCGA 1992, s 165 in respect of

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