CG66881 - Relief for Gifts of Business Assets: Summary of Rules for Gifts Before 14 March 1989
Pre-14 March 1989 Rules – Business Assets
Pre-14 March 1989 Rules – Non-Business Assets
Relief for gifts of agricultural land was introduced from 26 March 1974, with business assets and non-business assets following in 1978 and 1980 respectively.
Significant changes to these provisions had effect from 14 March 1989, which essentially limited the scope of the relief to gifts of business assets only, as is now reflected in TCGA92/S165. However, you may have a case where a person is disposing of an asset that they acquired as a gift under the old rules and these are summarised below, so that their acquisition cost can be verified. If further detail is required, you may need to refer to the legislation that was in force at the relevant time or the guidance contained in previous versions of the CG manual.
In general, relief was given in the same way as it now is for 1989 onwards. The held-over gain is deducted from both the chargeable gain and the donee’s acquisition cost. Normally the held-over gain was in effect recovered on the disposal by the donee, because their acquisition cost is reduced by the held-over gain. It may be lost however if, for example, the donee's gain was exempt.
Pre-14 March 1989 Rules – Business Assets
- The meaning of ‘business assets’ was basically that which applies after 14 March 1989, see CG66884.
- Hold-over relief was available on gifts of business assets after 11 April 1978 and before 14 March 1989 where the donor was an individual. Relief was not available where the gift was made by a company. The donee always had to be resident or ordinarily resident in the UK
- Relief was also available on the transfer of business assets by trustees to a beneficiary after 11 April 1978 and before 6 April 1982. The beneficiary could be an individual or a company and the transfer had to be on their becoming absolutely entitled to the assets or on the termination of a life interest in the assets. For transfers after 5 April 1982, relief was only available if the beneficiary was a company
- The donee could only be an individual where the gift was made after 11 April 1978 and before 6 April 1980
- The donee could be a company where the gift was made after 11 April 1978 and before 14 March 1989
- The donee could only be a body of trustees where the gift was made after 11 April 1978 and before 6 April 1981
Pre-14 March 1989 Rules – Non-Business Assets
- Disposals by individuals: Hold-over relief was available on gifts of non-business assets after 5 April 1980 and before 14 March 1989 where the person making the gift was an individual. Relief was not available where the gift was made by a company. The donee always had to be resident or ordinarily resident in the UK
- Disposals by trustees: Hold-over relief for non-business assets was available for gifts made by trustees to individuals or other trustees where the gift was made after 5 April 1982 and before 14 March 1989. The donee had to be resident or ordinarily resident in the UK
- Gifts to individuals: Hold-over relief was available on a gift of non-business assets to an individual where the gift was made at any time after 5 April 1980 and before 14 March 1989
- Gifts to trustees: Hold-over relief was available on a gift of non-business assets to a body of trustees where the gift was made after 6 April 1981 and before 17 March 1986. While the relief was still available on gifts made after 17 March 1986 and before 14 March 1989, there were changes to the rules where the trustees were resident in the United Kingdom, but treated as non-resident under a Double Taxation Agreement
- Gifts to a company: Hold-over relief was not available on any gift of non-business assets to a company between 5 April 1980 and 14 March 1989, except under CGTA79/S126.
Interaction with Rebasing
From 6 April 1988, assets that were held on 31 March 1982 were deemed to have been sold and immediately reacquired at its market value on that date. See CG16700C for further guidance on rebasing. If the held-over gain occurred before 1 April 1982 then for rebasing purposes no restriction is made for the held-over gain in computing the value at 31 March 1982.
The aim of rebasing was that, with some exceptions, only gains or losses accruing since 31 March 1982 are brought into account.
One such exception to this arose in the situation where:
- An asset was gifted between 1 April 1982 and 5 April 1988 inclusive, and
- The donor owned the asset at 31 March 1982, and
- The donee disposed of the asset after 5 April 1988
If hold-over relief was claimed on the first disposal, as rebasing had not yet been implemented, the donee’s acquisition cost would be reduced by an amount that included gains accruing prior to 31 March 1982. To address this, TCGA92/SCH4 provided for the reduction in the donee’s acquisition cost to be halved. See CG16980P for further details.
However, from 6 April 2008, this relief was withdrawn in respect of hold-over relief, such that the full deferred gain would be brought into charge on the subsequent disposal by the donee after this date.