New announcement. Learn more

CHARTERED ACCOUNTANTS (ICAEW)

News and advice to help make your property business a success

Landlords TaxProperty TaxLandlords Tax ReturnsLandlords AccountsProperty Tax ReturnProperty AccountsLandlords FinancialLandlords AccountantTax ReturnsTaxChartered AccountantsOnline AccountantOnline BookkeepingOnline Tax ReturnsYour Online AccountantYour Online BookkeeperVATBusinessadviceHMRCAccountingPropertyCashflowDividendsExpensesNICPAYEProperty AccountantSDLTSmallbusinessBusinesstipsCapital Gains TaxFHLsFurnished Holiday LettingsIhtexemptionsIncome TaxInheritance TaxInvestment Property TaxTax ReliefTaxplanningCgtGiftsLandlord RepairsPensionProperty bookkeeperProperty LettingSole TraderTaxreturnVAT invoiceAllowable Business ExpensesAnnual Exempt AmountBad Debt Tax ReliefBADRBusiness ExpensesBusiness RateBusiness tipsCapital AllowancesCapital GainsCapital gains tax propertyCashbasisChild BenefitComplianceDeductibleexpensesDirectors LoansDisincorporationEmployment AllowanceFinanceFinancialmanagementHMRC complaintsHoliday Lets TaxISALettingsMaking Tax DigitalMakingTaxDigitalMileage AllowanceMobilephonesMTDMTD UpdateNational InsuranceOverlapreliefPartnershipPartnershipbusinessesPayrollingPprProperty Company TaxProperty Tax Deductible ExpensesPropertyallowanceReimbursedexpensesRent a Room ReliefRentalResidence ReliefSmall BusinessTax free incomeTimetoPayWorking from home60 day capital gains limitAbolitionclass2AccrualsbasisAcquisitionsADRAdvisoryfuelratesAIAirBnBAlphabet sharesAmapAnnual Tax on Enveloped DwellingsAppealArtificial intelligenceAssessmentAsset disposalAssociated CompanyAssociated Company Tax RulesAutumnstatementBad DebtBaddebtsBadgesoftradeBeancounterBenefits in KindBreakeven PointBudgetBusiness adviceBusiness asset defermentBusiness coachBusiness ContinuityBusiness EntertainmentBusiness RatesBusiness Rates ReliefBusinessgrowthBusinesstypesBuy or Lease EquipmentBuytoletCapital Allowances for CarsCapital GainCapitalallowancesCapitalexpenditureCar Capital AllowancesCarry Back LossesChange of Tax BasisChatGPTCIS SchemeClass 2 NICCommon TenantCompanies ExpenditureCompanies HouseCompany Account DeadlinesCompany Account FilingCompany Strike OffCompany Tax Efficient PropertyCompanyassociationCompanyloanstaxfreeCompulsory Strike OffConstruction Industry SchemeContacthmrcContentmarketingContributionsCorporation Tax LossesCorporation Tax New RegimeCorporation Tax RatesCorporationTaxCostsCryptocurrencyCustomerlistimplicationsDeductible Business ExpensesDeductionsDemergerDepreciationDevelopmentDirectorsDirectorsloansDisallowable Business ExpensesDiscoveryDisposalsDispute ResolutionDividend allowanceDividend Allowance ReductionDividend PlanningDividendallowanceDLADomestic Items Tax ReliefDormantcompanyEISEmployee DiscountEmployee managementEmployeecompensationpaymentsEmployeeOwnershipTrustEndoflifeplanningEnquiryEnterpriseResourcePlanningEntertainmentEntrepreneurmindsetEquityExpenses Allowed For TaxExtrabenefitEyetestsFlat Rate SchemeFlippingFurnished Holiday Lets TaxGift AidGift AllowanceGrowthhacksHelp to pay tax billsHICBCHMO Licensing FeesHoldoverreliefHoliday Lettings TaxHome responsibilities protectionHow to apply for a Business LoanHow to Extract ProfitHumourHybridIllegaldividendsIncomeIncome and GainsInflationary GainsInfluencersInheritance Tax Nil Rate BandInterest RatesInterestreliefInterestrestrictionInvoicingIR35Joint TenantKeypersoninsuranceLandlords Self AssessmentLate vat registrationLBTTLeadgenerationLeadmagnetLeanbusinessmodelLetting Agent DisbursementsLetting Agent RecharresLettings ReliefLifetime LimitLimitedcompanyLiquidation DemergerLoanLoaninterestLong Lets TaxLongserviceLTTMainresidencereliefManaged LetsManagement accountingMaritalhomedivorceMarriage allowanceMarriageallowanceMileage paymentMinimumwageMixedusesdltMortgage costsMortgage Interest ReliefNew propertyNewcompanycarfuelratesNewnicrulesNIC 2023 to 2024NIC savingsNicdisregardNicreductionNMWNmwerrorsNon Allowable Business ExpensesNon-taxableNudgeletterOptiontotaxvatOverpayment ReliefOverseas propertiesPaperformPartnership schemesParttimePatternofoccupancyPAYE by Direct DebitPayrollPenaltypointsPension Payments Tax ReliefPensioncontributionsPensionsPerformance-reviewsPeriodofgracePeriodsofabsencePersonal ExpensesPersonal financePersonalallowancePersonalguaranteesPostcessationreliefPretradingexpensesProfitProfit-and-lossProfitAndLossProperty AllowanceProperty Development CompanyProperty IncorporationProperty Investment CompanyProperty investor accountsProperty investor tax tipsProperty Rental BusinessProperty TradingPropertycompanyPRRR40Recharges by Estate AgentsRegularpaymentsReliefRent your driveRentaroomResearch & DevolopmentResidential property gainsResidentialsdltRetail stock controlRetainedprofitsRevenueRoom for rent taxRtiSASalarySavingsSDLT changesSection 455 TaxSection455taxSelective Licences LandlordsSelf AssessmentSelf-employednicSelfemployedSelling OnlineSeperationServicechargesSettlementslegislationSimplified ExpensesSmallbizSmallbusinessratereliefSoftwareSpring BudgetStaffpartiesStamp dutyStudent Loan DeductionsSuccessJourneySurplus CashTax Allowance on DrivewaysTax AllowancesTax BreakTax CodesTax DeadlinesTax DeductionsTax Filing DeadlinesTax Free ChildcareTax ImplicationsTax on Company VansTax positionTax RefundTax tips for landlordsTaxbillpaymentsTaxconsequencesTaxincentivesTaxpositionTaxpositionassetsTaxreliefTaxreliefsTaxsesTerminationpaymentsTipsTrade professionalTrading lossesTrainingTransfer AssetsTransfer Assets Between SpousesTravelUmbrellacompanyUndisclosedincomeUnpaid RentVAT Bad Debt ReliefVAT DeadlinesVAT DisbursementsVAT PenaltiesVAT registrationVAT Reverse ChargeVatpenaltiesVatregisteredVatregistrationthresholdWellbeing
TAGS

Dealing with gift hold-over relief ‘nudge’ letters

Dealing with gift hold-over relief ‘nudge’ letters

HMRC are sending one-to-many ‘nudge’ letters to taxpayers who included an invalid claim for gift hold-over relief in their 2021/22 tax return. This may be because a separate claim form was not included with the return, or the claim form was included but not signed. If you receive such a letter, it is important that you do not ignore it – without a valid claim, HMRC will require any capital gains tax due to be paid now rather than deferred.

What is gift hold-over relief?

Gift hold-over relief is a useful capital gains tax business relief that allows the capital gains tax due on a gift to be deferred by ‘holding over’ the gain, reducing the transferee’s base cost by the amount of the held-over gain. The relief is often used to aid succession planning.

Eligible gifts

The relief is available for:

·         gifts of business assets used for the purpose of a trade or profession carried on by an individual as a sole trader or as a partner in a partnership, by an individual’s personal company or by a member of a trading group where the holding company is the individual’s personal company;

·         gifts of unlisted shares and securities in a trading company or the holding company of a trading group where the individual owns at least 5% of the shares (for trustees, the holding must be at least 25%);

·         gifts of land deemed to be agricultural land for inheritance tax purposes;

·         assets the disposal of which is a chargeable transfer for inheritance tax and not a potentially exempt transfer; and

·         certain gifts that are exempt from inheritance tax, such as a gift from a trust for bereaved minors.

Mechanics of the relief

As a gift by its very nature is not made at arm’s length, any gain arising on disposal is calculated by reference to the market value of the asset rather than the proceeds, if any. For an outright gift, the full gain (calculated using the market value as the consideration) can be held over. The transferee’s base cost is the market value as reduced by the held-over gain.

Example

Bill gives his son James his workshop, which cost £50,000. At the time of the gift, the market value was £140,000. The gain is £90,000, which Bill and James agree to hold over. James’ base cost is £50,000 – the market value of £140,000 less the held-over gain of £90,000.

If the transferor receives some proceeds, the gain computed by reference to the actual proceeds is immediately chargeable. However, the difference between the market value and the proceeds can be held over.

Example

Elizabeth sells her studio to her daughter Dawn for £40,000. It cost her £30,000 and has a market value of £75,000. They claim hold-over relief. The £10,000 difference between the proceeds (£40,000) and the original cost (£30,000) is immediately chargeable. However, the remainder of the gain (the difference between the market value and the proceeds) of £35,000 is held over. Dawn’s base cost is £40,000 (£75,000 – £35,000).

Joint claim

The claim must be made jointly by the transferor and the transferee on the dedicated claim form. It must be signed by both parties.

Dealing with the letter

If you receive a nudge letter you should send HMRC a valid claim form signed by both parties or, if the gift is not eligible for the relief, amend your tax return to remove the claim.