CG66884 - Relief for Gifts of Business Assets: Qualifying Assets
To qualify for the hold-over relief offered by TCGA92/S165, the asset gifted must fall within one of the categories discussed below.
‘Business Assets’ – TCGA92/S165(2) & SCH7/PARA2(2)
Hold-over relief can be claimed if the gift:
- Is, or is an interest in, an asset used for the purposes of a trade, profession or vocation carried on by:
- The donor, or
- Their personal company, or
- A member of a trading group of which the holding company is the donor’s personal company
- Consists of shares or securities of a trading company, or of the holding company of a trading group, where:
- The shares or securities are not listed on a recognised stock exchange (see CG50250), or
- The trading company or holding company is the donor’s personal company
The same assets are also listed as eligible for relief under TCGA92/SCH7/PARA2(2), which applies where the donor is the trustees of a settlement, except that in the case of the first bullet point the trade, profession or vocation must be carried on by either the trustees making the disposal or a beneficiary who had an interest in the settled property immediately before the gift. For the second bullet point, the modification in respect of trustees is that, if the shares or securities are listed on a recognised stock exchange, at least 25% of the voting rights in respect of the company are exercisable by the trustees making the gift.
The exceptions to the assets listed above where relief is precluded, under TCGA92/S165(3), are where:
- In the case of a disposal of shares or securities, the donee is a company
- In the case of a disposal of QCBs, a gain is deemed to accrue by virtue of TCGA92/S116(10)(b), see CG53711
- A claim to relief in respect of the same gift is possible under TCGA92/S260(3) (‘Gifts on which inheritance tax is chargeable’, see CG67030)
A ‘personal company’ for the above purposes, under TCGA92/S165(8), means a company in respect of which the donor can exercise at least 5% of the voting rights.
The terms ‘holding company’, ‘trading company’ and ‘trading group’ mean the same as they do in other areas of the TCGA, such as Business Asset Disposal Relief (see CG64055 et seq).
‘Trade’, ‘profession’ and ‘vocation’ have the same meaning as for Income Tax purposes, see BIM14010.
Woodland – TCGA92/S165(9)
Specific provision is made within the legislation that the expression ‘trade’ is taken to include the occupation of woodlands where these are managed by the occupier on a commercial basis and with a view to the realisation of profits.
Agricultural Property – TCGA92/SCH7/PARA1
Where the gift is of an asset which is, or is an interest in, agricultural property within the meaning of IHTA84/PT2/CH5 (see IHTM24030), relief is available even if the agricultural property is not used for the purposes of a trade. In respect of such property, only one of the following conditions needs to be met for it to be an eligible asset for the purposes of hold-over relief:
- The gift is itself a chargeable transfer for Inheritance Tax purposes and a reduction is made in respect of the agricultural property by IHTA84/PT5/CH2 (see IHTM24001), or
- If the gift were a chargeable transfer, then a reduction would have been so made, or
- A reduction would be so made but for the restrictions imposed by IHTA84/S124A (see IHTM24172)
Where any of these conditions are met, relief is available for a gift of agricultural property.
Gifts of Interests in UK Land to or from Non-residents – TCGA92/S165(7A) to (7D) & S167A
Following the phasing in from 6 April 2015 of a charge to tax for non-UK resident persons disposing of direct or indirect interests in UK land, the scope of hold-over relief was broadened to accommodate gifts of such property to and from non-UK residents.
Under TCGA92/SS165(7A) to (7D), where the gift is of a direct or indirect interest of UK land (see CG73920) by a non-UK resident to a donee that is UK resident and, in the absence of any relief the arising gain would be charged under TCGA92/S1A(3)(b) or (c)*, then hold-over relief will be available.
Similarly, TCGA92/S167A provides that where a non-resident person is the donee for a gift of a direct or indirect interest in UK land, either from a UK or non-UK resident donor, hold-over relief will again be available.
*These sections were re-written for disposals from 6 April 2019 see CG10150.