CG67033 - Relief for Gifts Subject to Inheritance Tax: Qualifying Disposals
Chargeable and Exempt Transfers
{#}Chargeable and Exempt Transfers
Hold-over relief under TCGA92/S260 can be claimed where the disposal amounts to a chargeable transfer within the meaning of IHTA84, common examples of which being gifts to most settlements (see IHTM04027 for further detail). Relief is available in this instance even if no Inheritance Tax is actually payable, for instance if the transfer of value is covered by the Annual Exemption or a Nil-Rate Band. This is also relevant for disposals like that in Melville v IRC [2001] BTC 8039 where there is a significant capital gain but the value of the transfer for Inheritance Tax purposes is low – relief will still be available in these circumstances.
The relief is expressly not available where the gift amounts to a potentially exempt transfer for Inheritance Tax purposes. A common example of this would be a gift from one individual to another, see IHTM04057 for further detail.
In addition to chargeable transfers, hold-over relief is also available where the gift is covered by certain Inheritance Tax exemptions. Under TCGA92/S260(2), this applies where the gift is:
- to a political party and is exempt under IHTA84/S24 (see IHTM11191)
- to a maintenance fund for historic buildings and is exempt under IHTA84/S27 (see IHTM11014)
- a conditionally exempt transfer under IHTA84/S30 (see IHTM11260)
- a disposition of a beneficial interest in possession in property comprised in a settlement held by a person immediately before their death, by which the property becomes held on trust in a maintenance fund for historic buildings (IHTA84/S57A)
- a beneficiary of an Accumulation and Maintenance trust becoming absolutely entitled to the trust property and that occasion is exempt from Inheritance Tax due to IHTA84/S71(4) (see IHTM42807)
- a bereaved minor becoming absolutely entitled to trust property, dying themselves before becoming absolutely entitled or having property paid or advanced for their benefit and that occasion is exempt from Inheritance Tax due to IHTA94/S71B(2) (see IHTM42815)
- a beneficiary of an 18-to-25 trust becoming either absolutely entitled to trust property at or under the age of 18, dying under the age of 18, having property paid or advanced for their benefit or on the trust property becoming subject to the provisions for bereaved minors and that occasion is exempt from Inheritance Tax under IHTA84/S71E (see IHTM42816)
- a conditionally exempt occasion under IHTA/S78(1) (see IHTM42650)
- a disposal of an asset comprised in a settlement where, as a result of the asset or part of it becoming comprised in another settlement, there is either no or a reduced charge to Inheritance Tax, by virtue of paragraphs 9, 16 or 17 of IHTA84/SCH4
Where you are uncertain about the correct treatment of a disposal for Inheritance Tax purposes, first consult the guidance in the Inheritance Tax Manual. Requests for technical assistance can be sent to Mailbox, IHT Technical (CS&TD Business, Assets & International).
{#}QCBs
Where a person holds qualifying corporate bonds (QCBs) as a result of a takeover or share reorganisation, TCGA92/S116(10) requires the computation of the gain that would have arisen if the shares had been sold at their market value at the date of reorganisation. This gain is deferred and accrues on a later disposal of the QCBs. Under TCGA92/S260(6), hold-over relief is expressly not available to further defer this gain from crystallising.
{#}Gifts of Interests in UK Land to or from Non-residents – TCGA92/S260(6ZA) to (6ZD) & S261ZA
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/S260(6ZA) to (6ZD), 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/S261ZA 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.
It is important to note in these instances that, where the donor has held the direct or indirect interest in UK land for some time, hold-over relief is only permissible in respect of gains accruing since the asset could have been within the charge to UK tax if held by a non-resident. See CG66886 for more detail on how this restriction is imposed.
*These sections were re-written for disposals from 6 April 2019 see CG10150.