CG66621 - Reliefs: Capital Gains Tax and Gifts: Exemptions and No Gain/No Loss: Calculation for Gifts to Charities

The rules for gifts and other bargains not made at arm’s length to charities and national heritage bodies are in TCGA92/S257. Ordinary commercial transactions are dealt with using the normal rules.

If the disposal is a gift or for a consideration less than the amount allowable under TCGA92/S38 both the disposal and the acquisition are treated as taking place for an amount which gives neither a gain nor a loss to the donor.

If the consideration for the disposal exceeds the amounts allowable under TCGA92/S38, you take into account the actual consideration which passed and not the market value.

If the disposal was made before 6 April 2008 you should include any indexation allowance due if the donor owned the asset on 6 April 1998, see CG17200+. See TCGA92/S55 (5)-(6) (CG46111 - CG46112) if the donor held the asset on 31 March 1982.

An anti-avoidance provision is contained at TCGA92/S257A, with the effect that the no gain/no loss treatment prescribed by TCGA92/S257 is not available for ‘tainted donations’ as defined in ITA07/PT13/CH8 and CTA10/PT21C, or any ‘associated donations’ as defined by ITA07/S809ZM, CTA10/S939F. Broadly, these are donations where the donor’s main purpose was to secure a financial advantage from the charity, for themselves or someone connected to them. Detailed guidance is available at within on gov.uk.

Examples

In all the examples below, Jess disposes of shares to a charity in 2019. She acquired the shares for a consideration of £100,000 in 1999.

  1. Jess gifts the shares at a time when they have a market value of £250,000. Jess is treated as having disposed of the shares for a consideration of £100,000 and the charity as acquiring them for £100,000.
  2. Jess sells the shares for a consideration of £75,000 at a time when they have a market value of £250,000. The result is the same as 1 above: Jess is treated as having disposed of the shares for a consideration of £100,000 and the charity as acquiring them for £100,000. The actual consideration received by Jess does not matter, as it is less than her acquisition cost.
  3. Jess sells the shares for a consideration of £150,000 at a time when they have a market value of £250,000. Jess is treated as having sold them for a consideration of £150,000 and the charity as acquiring them for £150,000. As a result, Jess has a chargeable gain of £50,000.
  4. Jess gifts the shares at a time when they have a market value of £80,000. Jess is treated as having disposed of the shares for a consideration of £100,000 and the charity as acquiring them for £100,000. Jess does not make an allowable loss on this transaction.
  5. Jess sells the shares for a consideration of £30,000 at a time when they have a market value of £80,000. The result is the same as 4 above: Jess is treated as having disposed of the shares for a consideration of £100,000 and the charity as acquiring them for £100,000. The actual consideration received by Jess does not matter, as it is less than her acquisition cost.