Capital Gains Tax Reliefs: Holdover Relief and Rollover Relief
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It is possible via the operation of holdover and rollover relief to defer gains that may arise on disposal of
certain assets.
This relief applies to gifts of business
assets, that is assets used in a
trading business, or shares in an
unquoted trading company. On a gift
of a business asset, the transferor
and transferee of the asset can
jointly elect within two years of the
gift of the asset to “holdover” any
gains arising. Effectively the person
receiving the asset as a gift agrees to accept any chargeable
gains that have arisen during the period of ownership of the
person giving the asset. When the person receiving the asset
disposes of it, the chargeable gains that arose during the
previous owner’s period of ownership and any chargeable gains
arising during the person who has received the asset’s period of
ownership are charged to capital gains tax.
This relief is particularly useful
in succession planning, where
perhaps parents wish to pass
the assets used in a sole trader
business or partnership or the
shares in an unquoted trading
company to the next
generation, such as their
children or other family
members.
In addition, gifts of assets to beneficiaries from a trust can also
be subject to holdover relief claims, so when the beneficiary
finally disposes of the asset, they will be liable to capital gains tax
on gains that have arisen in their period of ownership and the
trust’s period of ownership. Holdover relief can also be claimed
where business assets are gifted into trust.
Where a sole trader or partnership decides to incorporate their
business, but wishes to retain some of the assets, it is possible
for the individual(s) and the company to holdover any gains. The
company will then be charged to corporation tax on capital gains
on these gains, plus any gains arising during the company’s
period of ownership on an ultimate disposal of the