Taxation of Chargeable Gains Act 1992 Schedule 7AC paragraph 37

Recovery of held-over gain on claim for gifts relief

Paragraph 37 ensures that where a company disposes of an asset that would otherwise qualify for the substantial shareholding exemption, any gain previously deferred under gifts hold-over relief is brought back into charge as a chargeable gain.

• Where a company disposes of an asset and the allowable expenditure has been reduced because of an earlier gifts hold-over relief claim under section 165, the held-over gain is recovered on disposal.
• If the disposal would otherwise be exempt from charge under the substantial shareholding exemption, the held-over gain (or a fair proportion of it) is treated as a chargeable gain to which the exemption does not apply.
• The appropriate proportion of the held-over gain to be brought into charge is determined on a just and reasonable basis, having regard to the subject matter of both the current disposal and the earlier gift disposal.
• The chargeable gain is treated as accruing at the time of the current disposal, ensuring it cannot escape tax through the interaction of gifts relief and the substantial shareholding exemption.