CG66450 - Chargeable Gifts: Introduction

What is a gift?

Disposal by trustees

Market value

Reliefs

Gifts back

What is a gift?

Strictly the word ‘gift’ should only be used to describe a transfer from one person to another for no consideration at all, including gifts in settlement to trustees, see CG35700. However, because most of the Capital Gains Tax reliefs for gifts also apply to disposals at less than market value, in this section of the guidance the word ‘gift’, unless it is clear from the context, is used to refer to any transaction other than a bargain at arm’s length. The date of a sale below market value, once it has completed, is the date of the contract. The date of an outright gift is the date upon which the gift became effective (see CG14260).

Disposals by trustees

This guidance also applies to deemed disposals by trustees where beneficiaries become absolutely entitled to assets, see TCGA92/S71 (1) and CG37000.

Market value

As a gift is not a bargain made at arm’s length, under TCGA92/S17 the person making the gift (‘the donor’) is treated as disposing of the asset at market value. However, this does not apply for gifts to:

  • Spouses or civil partners – CG22000C
  • Charities, registered community amateur sports clubs or specified institutions
  • Employee trusts
  • Housing associations
  • The nation or various bodies, of assets considered to be national heritage

CG66620 discusses these exceptions further.

For more on market value see CG16330+ and CG14540 tells you about bargains which are not made at arm’s length.

The person receiving the gift (‘the donee’) is treated as acquiring the asset at its market value at the time of disposal, if none of the exceptions above apply. Where these exceptions are relevant, and the transfer is an outright gift or for a consideration less than the allowable expenditure within TCGA92/S38 (see CG15150P), it is treated as a transaction producing neither a gain nor a loss.

Reliefs

The most common forms of relief which are available in cases involving gifts are relief for gifts of business assets and gifts on which inheritance tax is chargeable. These are referred to as hold-over reliefs as they defer, or “hold-over”, the chargeable gain on the disposal by the donor until the asset is disposed of by the donee. See CG66880+ for guidance on gifts of business assets and CG67030+ for guidance on gifts on which Inheritance Tax is chargeable – the latter having priority if both are available. See CG66730+ for guidance on any gift made before 14 March 1989.

Gifts back

If you have a case where an asset which has been gifted is subsequently returned by the donee to the donor, you should deal with it on the basis that there have been two disposals:

  • one by the original donor to the original donee

and

  • one in the opposite direction.