Chapter 21 Gift relief

Question 1

gift relief

Answer 1

A gift is a disposal for CGT purposes; therefore, the donor could have to pay CGT even though they have received no money from the recipient. To calculate the donors gain, we assume the proceeds to be equal to the market value of the asset at the date of the gift.
The deferral relief – gift relief is available to defer the donors gain on the gift of an asset. We defer the gain by rolling over this capital gain against the base cost of the shares in the hands of the done. This reduces the donor’s capital gain to nil and the donee’s base cost is reduced.
Qualifying assets – not all gifts qualify for gift relief, it is only available for gifts under section 165 or 260 of TCGA 1992.
S165 – allows gift relief claim when the asset gifted is a business asset. For example, shares in an unquoted trading company, shares in a personal trading company, assets used in a business (plant and machinery etc) and agricultural land and buildings used for the purposes of farming.
S260 – allows gift relief where the gift is immediately chargeable to inheritance tax. This can apply when an individual makes a gift to a trust.
Claiming gift relief – you need to make a joint election (donor and done), the donor cannot make the gift relief claim on his own. The only time when gift relief is not a joint election is in the case of a gift to a trust. The time limit for gift relief is four years from the end of the tax year of disposal.