Gift relief to be "modernised"
A restriction on gift holdover relief will be reformed in 2026. This will affect gifts of certain shares, so what's the full story?
The Overview of Tax Legislation and Rates was published days after the Budget and mentioned modernisation of gift relief in 2026. After reviewing the detail, it appears that the relief isn't being modernised, rather, unintended anomalies arising from tax rules that came into force back in 2002 are being corrected. Broadly, when a gift of shares in a trading company is made, gift relief can be claimed if both parties agree to defer the capital gain until such time that the donee disposes of the shares. For example, where owner managers wish to pass their company on to the next generation, the relief enables them to do so without having to pay capital gains tax (CGT).
The relief is restricted when the company owns non-business assets, such rental properties or shares held as investments. However, this doesn't apply in the same way across all companies, as the formula used to calculate the restriction includes the value of chargeable business assets. Intangible assets are not chargeable business assets but can make up the majority of a company's value. Goodwill obtained or created after 1 April 2002 is not a chargeable asset, but goodwill obtained or created prior to 1 April 2002 is. This means it's possible that two companies can have the exact same asset types and values, but one incorporated before 1 April 2002 will be eligible for gift relief and one incorporated after 1 April 2002 will not. As the gift relief rules predate the intangible fixed assets regime, it appears that such anomalies were not intended.
In 2026 the formula that restricts gift relief on the disposal of shares will be updated to include assets within the intangible fixed assets regime, or that qualify for the substantial shareholding exemption. Consider delaying a gift of shares until the new legislation is in force if you would otherwise have a hefty CGT bill.
Related Topics
-
Should you voluntarily payroll benefits in kind?
The window to sign up to voluntarily payroll non-mandatory benefits in kind for 2027/28 will open in November. Is it worth volunteering to pay HMRC earlier than required or should you wait until it becomes mandatory in 2028/29?
-
Wise tax statement errors could affect 4,000 customers
Around 4,000 UK customers of financial services provider Wise have been told that tax statements issued between 2021 and 2025 contained incorrect figures. The errors could have resulted in taxpayers paying too much or too little income tax and capital gains tax (CGT). What should affected customers check?
-
CT61