Taxation of Chargeable Gains Act 1992 section 165

Relief for gifts of business assets

Section 165 provides hold-over relief for capital gains tax when business assets are gifted or otherwise disposed of at less than market value, allowing the gain to be deferred until the recipient eventually disposes of the asset.

• When qualifying business assets are gifted (or sold below market value), the transferor and transferee can jointly claim to "hold over" the capital gain, deferring the tax charge until the transferee eventually sells the asset
• Qualifying assets include assets used in a trade carried on by the transferor or their personal company, unlisted shares in trading companies, and listed shares in the transferor's personal company (where the transferor holds at least 5% of the voting rights)
• If actual consideration is received on the gift, the held-over gain is reduced by the amount by which that consideration exceeds the transferor's allowable base cost, meaning some or all of the gain may become immediately chargeable
• Where the gift also gives rise to an inheritance tax charge, the transferee can deduct the lesser of the inheritance tax attributable to the asset and the chargeable gain when they eventually dispose of the asset