Taxation of Chargeable Gains Act 1992 section 260

Gifts on which inheritance tax is chargeable etc.

Section 260 provides hold-over relief for capital gains tax purposes when assets are gifted in circumstances where inheritance tax is chargeable or where certain inheritance tax exemptions apply.

• When a qualifying gift is made, the transferor's chargeable gain and the transferee's acquisition cost are both reduced by the "held-over gain," effectively deferring the capital gains tax until the transferee eventually disposes of the asset.
• Qualifying disposals include gifts that are chargeable to inheritance tax (such as lifetime gifts into most settlements), as well as gifts covered by specific inheritance tax exemptions — including gifts to political parties, gifts for public benefit, gifts of heritage property, and transfers out of certain trusts for young people.
• Where inheritance tax has actually been paid on the transfer, the transferee receives a further deduction when they later dispose of the asset, equal to the lower of the inheritance tax attributable to the asset and the chargeable gain on that later disposal.
• Special rules apply where the disposal involves UK land and meets a non-residence condition — in such cases, the hold-over relief is limited to the portion of the gain that falls within the UK's charge to capital gains tax on non-residents.