Holding over gains on gifts

Gift Hold-Over Relief is a form of Capital Gains Tax (CGT) relief that allows you to defer paying CGT when certain assets, such as qualifying shares, are given away or sold for less than their market value, typically to benefit the recipient.

Instead of paying tax at the time of the gift, the gain is "held over" and passed on to the person receiving the asset. This reduces their base cost for CGT purposes, meaning the tax is only due when they eventually sell or dispose of the asset.

The individual making the gift will not usually have to pay CGT, as long as the transfer qualifies. However, CGT may still apply if the asset is sold at an undervalue rather than gifted outright. Transfers between spouses or civil partners are generally exempt from CGT.

A joint claim for the relief must be submitted by the giver and the recipient of the business asset gift.

To claim Gift Hold-Over Relief on business assets, you must meet all of the following:

• Be a sole trader, a business partner, or hold at least five percent of the voting rights in a company (your personal company).
• The assets must have been actively used in your business or in your personal company.

If the asset was only partly used for business purposes, partial relief may still be available.

To qualify for the relief when giving away shares, the shares must be in a company that is either:

• Not listed on any recognised stock exchange, or
• Your personal company.

In addition, the company must be primarily involved in trading activities, such as supplying goods or services. Companies that are mainly engaged in non-trading activities, such as investment, will generally not qualify.