Claiming Hold-over Relief on gifts is a method of postponing the chargeable gain (from CGT) until the transferee 'disposes of' (or sells) the gifted asset.
This guide, the Gift Hold-Over Relief help sheet, and the calculation example, will help you understand the basics of transferring business assets and similar transactions.
As a rule, giving away business assets (including unlisted shares), or selling them below market value, will qualify for HS295 Relief.
If the transferor can claim Gift Hold-Over Relief, there is no need to pay Capital Gains Tax (CGT) when giving away an asset.
Instead, the transferee (the person receiving the gift) will pay any applicable taxes on the 'held-over gain' when they sell (dispose of) it.
Important: In most cases, Capital Gains Tax is not payable on gifts when you 'transfer ownership' to a spouse (husband, wife), civil partner, or charity.
HM Revenue and Customs (HMRC) recognises two (2) basic types of relief:
Under the rules of Capital Gains Tax in the United Kingdom, you can claim Holdover Relief for gifts that qualify as (any):
HMRC Gift Hold Over Relief will be due by automatic process on business assets (any):
Note: The Capital Gains Tax guide contains more advice and information about how an increase in value results in chargeable gains after selling or disposing of property, shares, or personal possessions.
The main conditions for claiming tax reliefs of this nature will depend on whether the item you are giving away is a business asset or unlisted shares. Thus, to get full or partial relief, you would need to be:
If you will be giving away shares, they would need to be in a company (either):
The principal activities of the company would need to be in trading (e.g. providing goods or services). Hence, it cannot be in non-trading activities (e.g. offering financial investments).
Note: Similar treatment may also apply to business assets gifted to registered housing associations and certain kinds of trusts for employees.
Despite not having to pay Capital Gains Tax on any business assets that you give away, the transferor may need to pay tax when:
Holdover Relief Calculation Example:
The asset you give away to a family relative is worth £50,000 - even though you paid £17,000 for it. Thus, the chargeable gain is £33,000. If you or your relative make a claim for Holdover Relief, you do not pay tax on the 'held-over gain'.
So, the cost for calculating the transferee's CGT liability on any future disposal of the asset would be its true value (e.g. £50,000) But, it gets reduced by the amount of the held-over gain. In this example a reduction of £33,000 would leave a base cost of £17,000.
You should make a joint claim for Holdover Relief (e.g. the transferee and the transferor) at the same time that the gift is given away.
Use the Capital Gains Tax relief on gifts and similar transactions (Self Assessment helpsheet HS295) and include it with your Self Assessment tax return. You can upload a scanned copy if you send tax returns online.
Advice on Self Assessment
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Note: This short video presented by HM Revenue and Customs explains what allowable expenditure you can claim against Capital Gains Tax.
How Does Holdover Relief on Gifts Work in the United Kingdom?