The awkwardly named “Gift Hold-Over Relief” (GHOR) allows you to give away business assets – including certain shares – or sell them for less than they are worth, and not pay (or pay reduced) capital gains tax (CGT).
The person receiving the gift will potentially pay CGT when and if they sell the asset at some future date. Any taxable gain will then be the ultimate sale proceeds less the original cost.
The conditions for claiming relief depend on whether you’re giving away business assets or shares.
If you’re giving away business assets you must:
- be a sole trader or business partner, or have at least 5% of voting rights in a company (known as your ‘personal company’),
- use the assets in your business or personal company.
You can usually get partial relief if you used the assets only partly for your business.
If you’re giving away shares
The shares must be in a company that’s either:
- not listed on any recognised stock exchange,
- your personal company.
The company’s main activities must be in trading, for example providing goods or services, rather than non-trading activities like investment.
Claiming GHOR will usually mean that you can avoid paying any CGT on the gift
However, if you sell an asset for less than its true market value and if the value of the gift is more than you paid for it, CGT may be due. The example illustrating this point on the gov.uk website says:
Imagine that you sell a shop worth £81,000 to your brother for £40,000.
The shop cost you £23,000.
You would need to include the £17,000 gain (£40,000 minus £23,000) when you are working out your total taxable gain.
To claim this relief, you will need to make a joint claim with the person receiving the gift. We can help you complete the formalities and also consider other CGT reliefs that may be available to you.