HMRC internal manual

Capital Gains Manual

CG66880 - Reliefs: Gifts and Capital Gains Tax: Relief for Gifts of Business Assets: Introduction

General Principles

As mentioned in CG66450, there are two reliefs available that prevent a chargeable gain arising on a gift that would otherwise be subject to Capital Gains Tax.

This section discusses the relief contained within TCGA92/S165, which is aimed at deferring the Capital Gains Tax payable when business assets (see CG66884 for a definition) are gifted. The other relief that is available is within TCGA92/S260, which permits the deferral of Capital Gains Tax on a gift that is a chargeable transfer for the purposes of Inheritance Tax or falls within specified exemptions, see CG67030. It should be noted that, by TCGA92/S165(3)(d), if the relief under TCGA92/S260 is available then relief within TCGA92/S165 cannot apply: in essence, the former takes priority over the latter.

Broadly, TCGA92/S165 works by taking the gain that would have arisen for the donor in the absence of any relief (i.e. using market value at the date of disposal, see CG66450) and, instead of bringing it into charge, deducting it from the donee’s acquisition cost of the gifted asset that they will use going forward. The implication of this is that when the donee comes to dispose of the asset themselves, their gain will consist of both the increase in value during their period of ownership and the donor’s gain that was held-over.

This relief is typically used to aid succession planning for businesses, for example a mother passing shares in her personal trading company to her children. Another common use is as an alternative to incorporation relief under TCGA92/S162 (see CG65700P), for example where an individual transfers assets they have used in their sole trade to a company, which will carry on that trade going forward.