Glossary · UK
What is Holdover Relief (Gift Relief)?
A Capital Gains Tax relief that lets a gain on gifted business assets or shares be postponed, rolled into the recipient’s base cost instead of taxed immediately.
Full Definition
Holdover relief, also known as gift relief, allows a person who gives away certain qualifying assets -- broadly, assets used in a trade carried on by the donor or their personal company, and shares in trading companies that are not listed on a recognised stock exchange -- to postpone paying Capital Gains Tax on the gain at the point of the gift. Instead of the donor being taxed immediately, the gain is "held over" by deducting it from the recipient's acquisition cost, so the recipient effectively inherits the donor's lower base cost and will pay tax on the combined gain (the donor's original gain plus any further increase in value) when they eventually sell or otherwise dispose of the asset. Both the donor and the recipient must usually jointly elect for holdover relief on the relevant HMRC form, and it is commonly used when passing a family business, farmland, or shares in a trading company to the next generation, or when assets are transferred into certain trusts, since without it a lifetime gift can otherwise trigger an unwelcome CGT bill on an asset the donor has received no cash for. Holdover relief is different from Business Asset Disposal Relief, which reduces the rate of tax on a genuine sale rather than deferring the gain on a gift, and the two can sometimes interact in succession planning, so specialist tax advice is normally needed before making a large business gift.