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Tax treatment of gifts of business assets

One option for passing on the family business to future generations is to gift the shares in the family company or the assets used in the business to the relevant recipients. A gift is a disposal for capital gains tax (CGT) purposes and despite not receiving any money from the recipient, the transferor could have CGT to pay. To calculate the transferor’s capital gain, sale proceeds are deemed to be equal to the market value of the asset at the date of the gift. This rule applies whether or not the transferor and the transferee are connected persons. The deemed proceeds (ie market value) are also the transferee’s base cost for CGT purposes. To mitigate this cash flow problem, in certain situations, gift relief for business assets (also known as gift relief or hold-over relief) is available to defer the transferor’s gain on gifts of qualifying business assets.

The following commentary sets out the qualifying conditions for gift relief for business assets. The relief is available to individuals such