Business asset gift relief

Produced by Tolley

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Business asset gift relief
  • Qualifying persons
  • Qualifying assets
  • Trading company
  • Business assets
  • Non-business assets qualifying for gift relief
  • Amount of gift relief
  • No consideration
  • Restrictions
  • Can the market valuation be deferred?
  • More...

As discussed in the Basic calculation principles of capital gains tax guidance note, a gift of a chargeable asset is a disposal for capital gains tax (CGT) purposes. To calculate the transferor’s capital gain, the deemed sales proceeds are equal to the market value of the asset at the date of the gift. This rule applies whether or not the transferor and the transferee are ‘connected persons’, as defined in the Basic calculation principles of capital gains tax guidance note.

The transferee’s base cost is the deemed proceeds (ie market value) at the date of the gift.

This means the transferor may have CGT to pay even though they have received no money from the transferee. Also, the transferee has an elevated base cost which they have not actually paid.

To mitigate this cash flow problem, business asset gift relief (also known as gift relief or hold-over relief) can be claimed on the gift of qualifying business assets. Gift relief operates to defer the gain by rolling over the capital gain against the base cost of the asset in the hands of the transferee. Essentially the relief ensures the transferor’s capital gain is passed to the transferee.

Not all gifts qualify for gift relief. Sometimes the transferor will be left with a CGT liability even though they received no cash proceeds. However, where gift relief is not available or is not claimed, the transferor may be able to pay the tax due by instalments. This is discussed in the Business asset gift relief ― restrictions guidance note.

For a discussion of gift relief in the context of incorporation, see Capital gains tax implications of incorporation.

The conditions for relief explained below are summarised in our interactive flowchart. Alternatively, for a static pdf version, see the Flowchart ― business asset gift relief.

Qualifying persons

There are no territorial requirements in relation to the transferor specifically set out in the legislation. However, the transferor only needs to claim gift relief if the disposal

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