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Topic: Capital gains tax

Holdover gift relief calculator
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Holdover gift relief calculator

Holdover gift relief calculator

When you transfer business assets, e.g. shares in your trading company, to someone other than your spouse at undervalue, you can claim gift relief to defer part or all of the CGT liability. The amount of the gift relief will depend on the amount, if any, of consideration you receive for the asset. Use this calculator to help you work out the amount of gift relief you can claim.

Gift relief

If you are giving away a business asset, you can claim gift (or holdover) relief. This relief defers the capital gains tax (CGT) on the gift by transferring the liability to the recipient. When the recipient eventually sells the gift, the full CGT bill will normally fall due then and the recipient, rather than you, will have to pay it. The claim is made on the form at the end of HMRC Helpsheet HS295 (https://www.gov.uk/government/publications/relief-for-gifts-and-similar-transactions-hs295-self-assessment-helpsheet).

Partial consideration

Where you receive some payment for the transfer of the asset but this is less than market value, then the gift relief claim may need to be restricted. Your taxable gain will be the actual cash profit you make on the gift.

Example. Jenny bought a property for use in her trade in May 2001 for £50,000. In October 2016 Jenny transferred the property to Thomas when it was worth £200,000. Thomas pays Jenny £100,000 for the property. Jenny has made a cash profit of £50,000 (£100,000 - £50,000) so this is the amount of her taxable gain. The amount of gift relief will be the market value less the original cost less the taxable gain, i.e. £100,000 (£200,000 - £50,000 - £50,000).

Note. Where full gift relief is available, i.e. you are not receiving consideration greater than the asset’s original cost, the market value figure at the date of gift is irrelevant as none of the gain remains chargeable in the year of the gift. In this case, no formal valuation is necessary at the time of the transfer - there is a box on Helpsheet HS295 to request the valuation to be deferred. However, a valuation will be necessary where the amount of the gift relief is restricted.

Time limit

The time limit for gift relief is four years from the end of the tax year of disposal.

 

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