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HMRC internal manual

Lloyd's Manual

Capital gains: Names: relief for gifts of business assets

Relief for gifts of business assets is available when business assets are disposed ofother than in bargains at arm’s length (TCGA92/S165). Where syndicate capacityreverts to a managing agent, this may be treated as a bargain otherwise than at arm’slength if the Name and managing agent are connected persons. Under the currentLloyd’s rules for transferring syndicate capacity, all other transfers are throughthe auction process or bilateral arrangements, and will generally be arm’s lengthbargains.

Where syndicate capacity is transferred to a successor corporate or SLP member ofLloyd’s, the transfer may be other than at arm’s length where the Name and thesuccessor are connected persons. TCGA92/S17 treats any disposal and acquisition madeotherwise than by way of a bargain at arm’s length as taking place for aconsideration equal to the market value of the asset. TCGA92/S165 provides for gifthold-over relief to defer the consequent gain in whole or in part. If capacity istransferred by a Name to a Nameco under the Name’s control, then the considerationgiven will be the market value of the capacity at the date of transfer, because TCGA92/S18invokes the market value rule in TCGA92/S17 for transfers between connected persons.

Depending on the timing of the transfer, relief under business assets gift relief may needto be restricted in accordance with section TCGA92/S165 (7). See CG66976 for more details(LLM10000). This restricts relief where actual consideration isgiven in exchange for a transfer of business assets. HMRC’s view is that if a Namealready has shares in a Nameco, and subsequently transfers capacity to the Nameco withoutreceiving any further shares, the restriction will not apply as no actual considerationhas been received in exchange for the capacity. All that has happened is that the value ofthe existing shareholding has been enhanced.

Gift relief and intangible fixed assets: F2A 2005

F2A05 amended FA02/SCH29/PARA92, and introduced new sub-paragraph (4C) in relation tointangible fixed assets (IFAs) transferred on or after 16 March 2005. Where gift reliefunder section TCGA92/S165 is claimed in respect of an IFA transferred to a company, thetransfer is treated for Schedule 29 purposes as taking place at market value less theamount of the held- over gain. This does not affect the tax position of the person whotransfers the asset, but it ensures that a sum equal to the held-over gain is eventuallytaxed on the company under Schedule 29. Syndicate capacity held by companies is withinFA02/SCH29 (LLM4180), and this rule will therefore apply totransfers of syndicate capacity transferred to a company on conversion (LLM6050). In most cases, however, converting Names are likely tomake use of the roll-over relief available on conversion (LLM6160),which requires the capacity to be transferred in consideration for shares in the Nameco orother conversion vehicle, rather than gifting the capacity to the company.