CG66885 - Relief for Gifts of Business Assets: Basic Computation
In the simple case of a gift from donor to donee involving no consideration and where none of the restrictions regarding the use, occupation or nature of the asset discussed below apply, hold-over relief is calculated as in the following example:
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On 14 November 2019, Tom gifts the premises he used in his trade to Megan, in exchange for no consideration. At the date of the gift, the premises were worth £750,000. Tom acquired the premises on 7 June 2011 for £500,000.
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In the absence of any relief, Tom’s gain on the disposal (using its market value, see CG66450) would be £250,000
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Where Tom and Megan jointly claim for hold-over relief to be applied, TCGA92/S165(4) & (7) reduces both Tom’s gain and Megan’s acquisition cost by the amount of the chargeable gain which would have accrued in the absence of any relief (being £250,000)
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As a result, no gain is charged on Tom at the time of the gift and Megan’s acquisition cost is £500,000
In essence, the relief has ‘held-over’ a gain that would otherwise have been chargeable on Tom against Megan’s acquisition cost. If Megan later disposes of the premises, she will compute any gain or loss accruing on that disposal by reference to the reduced acquisition cost of £500,000.
Where some consideration is paid for an asset by the donee but this does not exceed the donor’s allowable costs under TCGA92/S38 (see CG15150P) then the relief works in the same way as above – so in our example, Megan could have paid Tom £500,000 for the premises and the computation for the relief given would be exactly the same.
If the consideration exceeds the donor’s allowable costs (excess proceeds), or other circumstances arise, then the amount of relief available is restricted, see CG66886 for these.