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HMRC internal manual

Capital Gains Manual

Gifts and Capital Gains Tax: introduction

These instructions tell you about the basic Capital Gains Tax treatment of gifts. You will find more information on the various reliefs for gifts CG66450+.

In this section of the instructions the word ‘gift’ describes a transfer from one person to another either for no consideration at all or otherwise than by way of a bargain made at arm’s length. It includes gifts in settlement, see CG35700. It also includes an occasion upon which a beneficiary becomes absolutely entitled as against the trustees of a settlement, see CG37000.

Market Value
No gain/No loss transfers

Market Value

Because a gift is not a bargain at arm’s length, the person making the gift is treated as disposing of the asset at market value, unless it is a situation within the paragraph below headed ‘No gain/No loss transfers’.

The person acquiring the gift is treated as acquiring the asset at its market value at the time of disposal.

CG16330+ tells you about market value.

CG14540 tells you about bargains which are not at arm’s length.

If you need help about

  • the time of disposal of an asset for Capital Gains Tax purposes, see CG14260 and CG35700
  • gifts of copyright and the procedures to be followed in Districts, see BIM50745
  • gifts of certain important works of art, scientific collections, etc and of assets given in connection with the preservation of historic houses or of land for the public benefit, see CG73300+.

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No gain/No loss transfers

Gifts to certain bodies are treated as made on a no gain/no loss basis. These are gifts to the following

  • charities
  • museums and other national or local institutions
  • housing associations.
  • employee trusts.

If the transfer is an outright gift or for a consideration less than the allowable expenditure within TCGA92/S38, it is treated as a transaction producing neither gain nor loss. For other disposals the market value rule is suspended and only the actual consideration is taken into account.

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The most common form of relief which is available in cases involving gifts is hold-over relief. The rules for hold-over relief changed with effect from 14 March 1989 and the instructions at CG66880+ tell you how to deal with claims to hold-over relief under the revised rules. If you are dealing with a gift before that date, you will find a summary of the previously applicable rules at CG66730+.

The rules were further changed

  • in Finance Act 2000 in connection with disposals of shares or securities to companies on or after 9 November 1999 (see CG66884), and
  • in Finance Act 2004 in connection with disposals of assets on or after 10 December 2003 to the trustees of certain settlements (see CG66920+ - for hold-over relief under TCGA92/S165 for gifts of business assets, and CG67064 - for hold-over relief under TCGA92/S260 for gifts of non-business assets), and disposals of shares or securities to companies on or after 21 October 2003 (see CG66884).

The main sections dealing with the various gift reliefs and exemptions are:

Payments by instalments CG66520+
Gifts to charity CG66642+
Gifts to housing associations CG66660+
Gifts to employee trusts CG36000+
Gifts of business assets CG66910+
Gifts chargeable to Inheritance Tax etc CG67030+
Gifts of heritage assets CG73300+