Policy paper

Capital Gains Tax relief for gifts of business assets

Published 3 March 2021

Who is likely to be affected

Non-UK resident individuals claiming relief for gift of business assets (more commonly known as Gift Hold-Over Relief).

General description of the measure

Gift Hold-Over Relief operates by deferring the chargeable gain on the disposal when a person gives away business assets or sells them for less than they are worth to help the buyer.

The gain then comes into charge when the recipient disposes of the gifted asset. The recipient is treated as though they acquired the asset for the same cost as the person who gave them the asset.

An anti-avoidance rule at section 167(2) Taxation of Chargeable Gains Act 1992 disapplies the entitlement to relief where a transferee company is controlled by a person who is not resident in the UK and is connected with the person making the disposal.

This measure clarifies that rule by ensuring that it applies when the non-UK resident person gifting the asset also controls the recipient company.

Policy objective

This measure improves fairness for those that can claim Gift Hold-Over Relief to ensure these rules work effectively.

Background to the measure

This measure was announced at Budget 2021.

Detailed proposal

Operative date

This measure will affect disposals made on or after 6 April 2021.

Current law

Current law relating to gifts of business assets is contained within sections 165 – 169G of the Taxation of Chargeable Gains Act 1992. Section 167 provides the law for gifts to foreign-controlled companies.

Proposed revisions

Legislation has been introduced in Finance Bill 2021 to amend section 167 of the Taxation of Chargeable Gains Act 1992.

This ensures Gift Hold-Over Relief is not available where a non-UK resident person disposes of an asset to a foreign-controlled company controlled either by themselves or another non-UK resident with whom they are connected.

Summary of impacts

Exchequer impact (£m)

2020 to 2021	2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026
Nil	Nil	Nil	Nil	Nil	Nil

This measure supports the Exchequer in its commitment to protect revenue.

Economic impact

This measure is not expected to have any significant economic impacts.

Impact on individuals, households and families

This measure will affect only a limited number of individuals who are non-UK resident that make a gift of business assets to a foreign-controlled company.

This measure clarifies that these rules apply when the non-UK resident person gifting the asset also controls the recipient company.

Customer experience is expected to remain broadly the same as this measure does not alter how individuals interact with HMRC. There is not expected to be any impact on family formation, stability or breakdown.

Equalities impacts

It is not anticipated that there will be impacts on groups sharing protected characteristics.

Impact on business including civil society organisations

This measure is expected to have no impact on businesses or civil society organisations as it only affects the potential eligibility for non-UK resident individuals claiming Gift Hold-Over Relief when making a gift to a foreign-controlled company.

Operational impact (£m) (HMRC or other)

There are no operational impacts for HMRC in implementing this measure.

Other impacts

Other impacts have been considered and none has been identified.

Monitoring and evaluation

This measure will be monitored through information collected from tax receipts.

Further advice

If you have any questions about this change, please contact the Capital Gains Tax policy team on Telephone: 03000 510915 or email: [email protected].