CGT holding over gains if you gift business assets

Gift Hold-Over Relief lets you defer Capital Gains Tax when giving away business assets or qualifying shares. It can be a tax-smart move for passing on wealth, but strict rules apply. Here’s what you need to know to claim it properly.

Gift Hold-Over Relief is essentially a deferral of Capital Gains Tax (CGT) when assets, including certain shares, are either given away or sold for less than their market value to benefit the recipient. This relief ensures that any gain on the asset is 'Held-Over' until the recipient decides to sell or dispose of the asset themselves. To achieve this, the recipient's acquisition cost is reduced by the amount of the held-over gain.

The individual giving the gift of a qualifying asset is not required to pay CGT on the transfer. However, CGT could be applicable if the asset is sold for less than its actual market value. Gifts exchanged between spouses and civil partners are exempt from triggering capital gains. A claim for the relief must be made jointly by both the person giving the gift and the recipient.

If you are giving away business assets, you must meet the following criteria:

• You must be a sole trader, business partner, or hold at least 5% of the voting rights in a company (commonly referred to as your 'personal company').
• The assets must be used within your business or personal company.

In cases where the assets are only partially used for business purposes, you may still qualify for partial relief.

When gifting shares, the shares must be in a company that's either:

• not listed on any recognised stock exchange; or
• your personal company.

Additionally, the company’s main activities must be trading, such as providing goods or services, rather than being engaged in non-trading activities like investment.