When it comes to making a chargeable disposal, it is prudent to consider what reliefs you may be able to claim. These reliefs could take your gain under the annual exempt amount and may result in you being able to defer your Capital Gains Tax (CGT) liability. However, it is always best to carefully consider if the relief would be applicable.
Two main types of relief available when it comes to mitigating chargeable disposals: hold-over relief and rollover relief. These two reliefs cannot be used in conjunction.
Hold-over relief is only available to individuals, unincorporated partnerships and trusts on the gift or sell at undervalue of business assets (which include certain shareholdings). Hold-over relief is also known as “gift relief”; this is usually used when transferring qualifying shares or business assets to a connected person. It effectively defers the CGT on the asset until a later disposal which is to avoid individuals being liable to CGT for a gain that they did not actually receive monies for.
The donor will need to have the consent of the recipient in order to claim the relief. The only time where this is not needed is when the asset is gifted to a trust. This is because the recipient is consenting to becoming liable for the charge upon their disposal of the asset.
Rollover relief is potentially available when the following types of business assets are sold:
- Land and buildings
- Fixed plant and machinery
Rollover relief is available when you intend to replace your business asset with another. For instance, if you have a warehouse and you decide to sell it for a larger premise. As long as you elect for rollover relief and purchase another warehouse within three years then the gain will be added to the base cost of your new asset, effectively rolling it in. You can also claim for a previous year, i.e. you buy a second warehouse six months before you sell the original, you can elect for rollover relief for the second warehouse as long as it was brought within a year before the sale of the original.
Rollover relief is a claim you can make unilaterally; you will not need the consent of the recipient of the asset.