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Taxable Gains on Gifts | What is the Gift Relief on the Transfer of Property?

Taxable Gains on Gifts | What is the Gift Relief on the Transfer of Property?

Mike Wakeford

What is Gift Hold over Relief?
Gift Hold-Over Relief is a tax relief that effectively defers Capital Gains Tax (CGT). The relief can be claimed when assets are given away (including certain shares) or sold for less than they are worth to help benefit the buyer. Gift Hold-Over Relief means that any gain on the asset is 'held-over' until the recipient of the gift sells or disposes of them. This is done by reducing the acquisition cost by the amount of the held over gain for the acquirer.

When is CGT Payable?
The person gifting a qualifying asset is not subject to CGT on the gift. However, CGT may be payable when the asset is sold for less than it’s worth but the sale still generates a gain. A claim for the relief must be made jointly with the person to whom the gift was made. Gifts between spouses and civil partners do not trigger capital gains, the spouse effectively inherits the acquisition history eg if a husband acquires an asset, then transfers it to his wife, when the wife then sells the asset the gain will be calculated on the selling price received by the wife less the original cost of acquisition by the husband.

Rules for Gifting business assets
If you are giving away business assets, you must:

  • be a sole trader or business partner, or have at least 5% of voting rights in a company (known as your 'personal company'); and
  • use the assets in your business or personal company.
You can usually claim partial relief if you used the assets partly for your business.
If you are giving away shares, then the shares must be in a company that is either:
  • not listed on any recognised stock exchange; or
  • Your personal company.

The company's main activities must be trading, such as providing goods or services, rather than non-trading activities like investment.
Claiming Gift Holder-Over Relief
It's important to figure out your gain amount. For example, you gift someone an asset worth £81,000 for £40,000. It costs you £23,000 the gain is £17,000. To claim gift hold-over Relief, you must claim jointly with the person you are gifting the asset to. You need to fill in the HS295 form and your self-assessment tax return for the gift hold-over Relief to be applied and the CGT to be taken off.

Contact us
If you need help Understanding how to report gives on a self assessment tax return or how you can claim gift holdover relief contact our specialist tax team today. Moore (South) can help you report this correctly and ensure your claiming gift holdover relief effectively.