Business asset gift relief ― restrictions

Produced by Tolley
Business asset gift relief ― restrictions

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

  • Business asset gift relief ― restrictions
  • Restrictions to the amount of gift relief
  • Partial consideration
  • Restrictions to the gain qualifying for relief
  • Non-business ownership period of an asset
  • Non-business use of an asset (buildings and associated land only)
  • Underlying non-business assets of a company
  • Can the market valuation be deferred?
  • Interaction with the NRCGT rules
  • Transfer from non-resident to UK resident
  • More...

Where assets are gifted or subject to disposal at undervalue, the legislation treats the disposal as having taken place for market value proceeds. The transferee’s base cost is the deemed proceeds (ie market value) at the date of the gift, no matter the actual consideration paid.

To mitigate the transferor’s cash flow problem where they have capital gains tax (CGT) to pay but may not have received any consideration, 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.

The conditions for claiming business asset gift relief and the mechanics of a claim for full relief are shown in the Business asset gift relief guidance note. It is recommended to read that guidance note before continuing.

This guidance note considers occasions where either the amount of gift relief is restricted or where the amount of the gain qualifying for gift relief is restricted. In either of these cases, this means a proportion of the gain remains chargeable following the gift relief claim, therefore this guidance note also considers the interaction of gift relief with other CGT reliefs.

The restrictions depend on the type of asset and are summarised in the Flowchart ― business asset gift relief restrictions.

Where the transferor or transferee is non-UK resident and the asset is chargeable under the non-resident capital gains tax (NRCGT) rules which apply to interests in UK land held directly or indirectly, the principles of the relief may be modified. This is discussed below.

Restrictions to the amount of gift relief

Partial consideration

Where the transferee (also known as the donee) makes a payment to the transferor (also known as the donor) on the transfer but the amount is less than the market

Popular documents