Commentary

C3.504 Holdover relief for gifts of business assets—reductions in relief

Capital gains tax
Capital gains tax | Commentary

C3.504 Holdover relief for gifts of business assets—reductions in relief

Capital gains tax | Commentary

C3.504 Holdover relief for gifts of business assets—reductions in relief

In certain circumstances there may be a reduction in the amount of holdover relief applying.

Reductions in relief—gifts of assets other than shares

If the disposal is of an asset, other than shares, which has not been used for the purposes of the transferor's trade throughout the entire period of ownership, the gain eligible for holdover relief is reduced proportionately1. The restricted amount of relief is calculated by multiplying the amount of the held-over gain by the fraction A/B, where A is the number of days in the entire period of ownership during which the asset is used for purposes of the trade and B is the total number of days in the entire period.

Similarly, where the asset is land, or a building or structure, only part of which has been used for business purposes during the period of its ownership by the transferor, or any substantial part of that period, only a proportionate part of the gain is eligible for holdover relief2. An example of this is where there is a shop with a flat above it.

There appears to be no formal guidance on how HMRC interprets the term 'substantial' and the facts of the particular case are crucial. The fraction of the gain that can be held over is determined on the basis of what is 'just and reasonable'. In simpler cases, this usually involves calculations by reference to floor areas, but calculations by reference to the valuations

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