What is a business asset gift for capital gains purposes?
Answered 17 March 2026
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What is a "Business Asset Gift" for Capital Gains Purposes?
A "business asset gift" for CGT purposes refers to a disposal of a qualifying business asset otherwise than under a bargain at arm's length, in respect of which hold-over (gift) relief may be claimed under TCGA 1992, s.165. The relief defers the CGT that would otherwise arise on the gift.
What the law says
The disposal
Relief under TCGA 1992, s.165 applies where an individual (the "transferor") makes a disposal otherwise than under a bargain at arm's length of an asset within s.165(2), and a claim is made jointly by the transferor and the transferee (or by the transferor alone where the transferee is a trustee).
Qualifying "business assets" — s.165(2)
An asset qualifies if it falls into one of two categories:
- Trading assets: It is, or is an interest in, an asset used for the purposes of a trade, profession or vocation carried on by:
- the transferor,
- the transferor's personal company, or
- a member of a trading group of which the holding company is the transferor's personal company.
- Shares/securities: It consists of shares or securities of a trading company, or of the holding company of a trading group, where either:
- the shares/securities are not listed on a recognised stock exchange, or
- the trading/holding company is the transferor's personal company.
The relief is also extended to agricultural property by Part I of Schedule 7.
"Personal company" means a company in which the individual can exercise at least 5% of the voting rights.
"Trade" includes the occupation of woodlands managed on a commercial basis with a view to profit.
Exclusions — s.165(3)
Relief is not available where:
- The disposal is of shares or securities and the donee is a company;
- The disposal is of qualifying corporate bonds (QCBs) where a gain is deemed to accrue under s.116(10)(b); or
- Relief under TCGA 1992, s.260 (gifts chargeable to IHT) is available — s.260 takes priority over s.165.
How the relief works — s.165(4)
Where a valid claim is made, both (a) the chargeable gain that would otherwise accrue to the transferor, and (b) the transferee's acquisition cost, are each reduced by the amount of the held-over gain. The gain is therefore deferred until the transferee disposes of the asset.
Where there is actual (part) consideration exceeding the allowable expenditure under s.38, the held-over gain is reduced by that excess — i.e. only the gain above the actual consideration is held over.
HMRC guidance / practice
General principle
HMRC describes the relief as aimed at deferring CGT when business assets are gifted. The gain that would have arisen for the donor (calculated using market value at the date of disposal) is deducted from the donee's acquisition cost. When the donee later disposes of the asset, their gain will include both the increase in value during their own ownership and the donor's held-over gain.
Typical uses
HMRC notes this relief is typically used for succession planning (e.g. a parent passing shares in a personal trading company to children) and as an alternative to incorporation relief under s.162 (e.g. transferring sole trade assets to a company).
Qualifying assets — summary
HMRC's Capital Gains Manual (CG66884) summarises the qualifying assets as:
- Assets (or interests in assets) used for a trade, profession or vocation by the donor, their personal company, or a member of a trading group whose holding company is the donor's personal company; or
- Shares/securities in an unlisted trading company or the donor's personal company.
For trustees making the disposal, the trade must be carried on by the trustees themselves or a beneficiary with an interest in the settled property immediately before the gift. If the shares are listed, at least 25% of the voting rights must be exercisable by the trustees.
Priority of s.260 over s.165
HMRC confirms that where relief under s.260 (IHT-chargeable gifts) is available, it takes priority and s.165 cannot apply.
Partnerships
Relief under s.165 is available to individual partners in transparent partnerships when they dispose of a share in partnership assets, and also to individuals who dispose of personal assets to a partnership.
Citation sources
14.1 An individual may qualify for entrepreneurs’ relief when their business becomes a partnership. A partner may also qualify for entrepreneurs’ relief on a disposal of part or the whole of a partnership business. 14.2 A partner may qualify for entrepreneurs’ relief (subject to the normal conditions relating, for example, to a personal company) when he disposes of all or part of a fractional share in company shares which are held as partnership assets. 14.3 Guidance concerning partnerships and
Hold-over relief can be claimed if the gift: Is, or is an interest in, an asset used for the purposes of a trade, profession or vocation carried on by: The donor, or Their personal company, or A member of a trading group of which the holding company is the donor’s personal company Consists of shares or securities of a trading company, or of the holding company of a trading group, where: The shares or securities are not listed on a recognised stock exchange (see CG50250), or The trading company o
As mentioned in CG66450, there are two reliefs available that prevent a chargeable gain arising on a gift that would otherwise be subject to Capital Gains Tax. This section discusses the relief contained within TCGA92/S165, which is aimed at deferring the Capital Gains Tax payable when business assets (see CG66884 for a definition) are gifted. The other relief that is available is within TCGA92/S260, which permits the deferral of Capital Gains Tax on a gift that is a chargeable transfer for the
n relation to the disposal as if the references to “chargeable gain” were references to “so much of any gain accruing on the disposal as falls to be dealt with as mentioned in subsection (7D)(a) or (b)” . 7C Subsection (7) has effect in relation to the disposal as if the reference to “the excess referred to in paragraph (b) above” were a reference to “so much of the gain mentioned in subsection (7B) which, ignoring this section and section 17(1), would accrue to the transferor on the disposal”.
for relief is made under this section in respect of a disposal— a the amount of any chargeable gain which, apart from this section, would accrue to the transferor on the disposal, and b the amount of the consideration for which, apart from this section, the transferee would be regarded for the purposes of capital gains tax as having acquired the asset or, as the case may be, the shares or securities, shall each be reduced by an amount equal to the held-over gain on the disposal. 5 Part I of Sche
Part V Transfer of business assets , business asset disposal relief and investors' relief Chapter II Gifts of business assets Relief for gifts of business assets. 165 1 If— a an individual (“ the transferor ”) makes a disposal otherwise than under a bargain at arm’s length of an asset within subsection (2) below, and b a claim for relief under this section is made by the transferor and the person who acquires the asset (“ the transferee ”) or, where the trustees of a settlement are the transfere