CG66889 - Relief for Gifts of Business Assets: Claims

Form of Claim

Claims to hold-over relief must be made jointly by donor and donee, except where the trustees of a settlement are the donee, in which case the claim is to be made by the donor alone.

The claim must be made using the form which accompanies HS295 ‘Relief for gifts and similar transactions’ whether or not the parties or party to the claim are required to complete a personal return for the tax year to which the claim relates. You should insist that the form is fully completed, in order to ensure the claim is quantified and to avoid the serious problems which have arisen in some cases from a lack of information when the asset is eventually disposed of. Due to measures put in place to stop the spread of coronavirus (COVID-19), the form can be completed using a digital signature rather than being physically signed by both transferor and transferee, until further notice.

You should not accept any claims to hold-over relief which try to limit the amount of relief to a figure of the parties’ choice (such as to utilise the donor’s available Annual Exempt Amount).

Claims must be made by the taxpayers personally, unless the donor or donee pre-deceases the claim in which case it can be made by their personal representatives.

Where the gift is to a partnership or LLP that is ‘transparent’ for Capital Gains Tax purposes, the gift is treated as being from the transferor to each of the partners/members individually and as such, a valid claim can only be made with the express consent of each of the partners receiving a share of the asset. A form signed on behalf of the partnership/LLP as a whole would be insufficient.

Time Limits

The general time limit within TMA70/S43(1) for making claims applies to hold-over relief. The claim must be made within four years from the end of the tax year in which the gift occurred.

Consequential Claims

Certain provisions within TMA70 allow a taxpayer to make various out-of-time actions where HMRC make a discovery assessment or amend a return in an ITSA enquiry closure notice.

Where a discovery assessment is raised (under TMA70/S29) on an individual, or a closure notice is issued (under S28A(2)(b)), to make good a loss of tax that was not brought about by careless or deliberate behaviour, that individual can make a claim to hold-over relief within one year from the end of the tax year in which the assessment was made (TMA70/S43A). Further detail on this provision is at SACM9015.

Recalling that hold-over relief affects both the donor’s liability to tax and the donee’s acquisition cost going forward, TMA70/S43A(5) provides that following a consequential claim, all the adjustments required to take account of the effect of the claim for any person’s liability to tax in any year (i.e. when the donee subsequently disposes of the asset) may be made.

Where an assessment is raised on an individual, or a closure notice is issued, in respect of careless or deliberate behaviour, the analogous provision in TMA70/S36(3) also permits effect to be given to a relief or allowance as if a claim had been made in respect of the period of assessment. However, as there is no mechanism for making the adjustments that would be required to the donee’s tax liability if they have disposed of the gifted asset by this time, individuals are not able to make a consequential claim to hold-over relief where the assessment is raised in respect of careless or deliberate behaviour.