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Legal Terms – Holdover Relief
Definition:
A tax relief mechanism that postpones liability for capital gains tax (CGT) on gifts or transfers of certain assets.
How It Works:
When an asset is given away or transferred, the gain that would normally trigger CGT can be “held over” — effectively delayed — so that:
Eligibility:
Holdover relief can be claimed when:
Example:
If a farmer gifts land worth £500,000 that was bought for £100,000, the £400,000 gain can be held over. The farmer pays no immediate CGT, but the recipient’s acquisition cost becomes £100,000 — increasing their taxable gain on a future sale
Definition:
A tax relief mechanism that postpones liability for capital gains tax (CGT) on gifts or transfers of certain assets.
How It Works:
When an asset is given away or transferred, the gain that would normally trigger CGT can be “held over” — effectively delayed — so that:
- The donor’s taxable gain is reduced to zero.
- The donee (recipient) inherits the asset with a reduced base value, meaning they pay CGT on the deferred gain when they eventually sell it.
Eligibility:
Holdover relief can be claimed when:
- The transfer is also subject to inheritance tax (a “chargeable transfer”).
- The asset is a business, agricultural land, or shares in an unquoted trading company.
Example:
If a farmer gifts land worth £500,000 that was bought for £100,000, the £400,000 gain can be held over. The farmer pays no immediate CGT, but the recipient’s acquisition cost becomes £100,000 — increasing their taxable gain on a future sale
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