Gift Relief Flashcards
What are the two types of gift relief and how are they claimed
Gift relief under S165 - gifted asset is a business asset
Gift relief under S260 - where the gift is immediately chargeable to IHT
S165 - joint election donor and donee
S260 - election
4 years following the end of the tax year in which the gift took place however in practice usually 31st Jan following the end of the TY in which the gift took place.
When can gift relief be claimed under S165
Gifting any number of shares in an unquoted trading company
Gifting shares in their personal trading company
Gifting shares in a quoted trading company where the donor has at least 5% of voting rights of the company
Sole trader gifting assets used in trade
Partner gifting assets used in trade
Individual gifting asset used in personal trading company
Unusual gift relief under S165
Gifting assets used in furnished holiday lets - furnished holiday letting qualifies as a trade
Agricultural L&B used for the purposes of farming qualifies for gift relief.
What is gift relief under S260
Gifting of any asset which is immediately chargeable to IHT - e.g. gifting (any) asset into a trust
When does gift relief not apply S260 and S165
S165 - gifting shares in quoted trading company where the donor does not own at least 5% of the voting rights in the company
S260 - Gift to a settlor interested trust, where either the settlor, their spouse or their minor dependent children may benefit.
When is gift relief restricted (3)
Under value
Partial business use (although has to be used in the business at the time of gift)
Personal trading company owns non trading assets
What is the full proforma
Deemed proceed = MV X
Cost (x)
Gain X
Excess proceeds (x) (chargeable now)
Remaining gain X
X* CBA / CA = gift relief (x)
Chargeable now X (chargeable now)
Excess proceeds
Actually received X
Cost (x)
Excess proceeds X
Base cost
Deemed cost MV X
Gift relief (x)
Base cost x
CA CBA
X x
X x
X
What are the conditions that apply for the donee (the recipient)
The donee must be chargeable to UK CGT therefore a resident in the UK
What happens if the donee emigrates
What can HMRC do
If the donee leaves the UKK within any of the following 6 tax years from the gift then the deferred gain is clawed back and charged to the donee at the date of their emigration
If after 12 months of emigrating the donee does not pay back the CGT with 12 months of the normal due date HMRC have the right to pursue the donor.
Main thing to remember about partial business use
MUST BE USED IN THE BUSINESS AT THE TIME IT IS GIFTED.
What are chargeable assets
L&B, Goodwill, P&M, assets held for investment
What are chargeable business assets
Chargeable asset used for business purposes - helps to generate profits which will be taxed as trading income.
What are non chargeable assets
Not charged to CGT - stock, debtors and cars.
