Gift Hold Over Relief allows the gain on a transfer to be deferred when a qualifying business asset is gifted. The relief defers the gain for the donor by reducing the base cost of the asset in the hands of the donee. It is noted that gift relief is restricted for any consideration received.

HMRC have updated their guidance and confirm that in most circumstances, Gift Hold Over relief will not be available for assets transferred during divorce procedures under a Court Order (or on an agreed transfer).

This is on the basis that the statutory right surrendered is actually consideration for the assets received in the settlement, with the result that hold over relief is prevented on part or all of the transfer.

This creates the following potential issues when transferring assets during divorce proceedings and it is important that the legal teams and their clients are fully aware that taxation liabilities may arise:

  • The divorce settlement being agreed on the mistaken belief that tax liabilities will not crystallise.
  • A taxation liability arises when there are limited cash funds.
  • A lack of cash preventing the individual from seeking to use rollover relief to defer any crystallising gains.

If you would like any assistance looking at Gift Hold Over Relief, get in touch with our expert team.

The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

Lambert Chapman Chartered Accountants

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