Chapter 22 Gift-relief restrictions

Question 1

gift relief restrictions

Answer 1

Full gift relief is not available where there is a sale at an undervalue (sold at less than market value). A sale at undervalue is treated as a gift for CGT purposes. We calculate the gain by assuming sale proceeds are the market value. A sale at undervalue will result in gains being left chargeable after a gift relief claim has been made, the gain will be equal to the excess proceeds:
Excess proceeds = cash received – base cost
The difference between the gain and the chargeable gain at market value for CGT purposes is the gift relief, which will be rolled over and deducted from the donee’s base cost.
Interaction with business asset disposal relief – a gain on a gift may be eligible for both gift relief and business asset disposal relief. When this occurs gift relief is applied first. If part of the gift still remains chargeable then busines asset disposal relief can be claimed on the balance, assuming the asset meet both gift relief and business asset disposal relief conditions. Gift relief claims is not mandatory and if this isn’t applied, you can allow the full gain to qualify for business asset disposal relief.