Taxation of Chargeable Gains Act 1992 Schedule 7, paragraphs 5–6

Reductions peculiar to disposals of assets

Section 5–6 of Schedule 7 sets out how gift hold-over relief is reduced when an asset has not been used wholly or exclusively for business purposes, either in terms of the time it was so used or the physical extent of business use in the case of buildings.

• Where an asset was used for the trade for only part of the ownership period, the held-over gain is scaled down by multiplying it by the fraction of days of business use over total days of ownership.
• Where a building or structure was only partly used for business purposes (for example, a shop with a let flat above), the held-over gain is further reduced by a just and reasonable apportionment reflecting the business-use portion.
• These two restrictions can apply cumulatively — a time-based reduction under paragraph 5 may be followed by a physical-use reduction under paragraph 6.
• Neither restriction applies where the asset qualifies (or would qualify) for agricultural property relief under the Inheritance Tax Act 1984, ensuring that farmland used in a trade is not doubly penalised.