CGT – BUSINESS RELIEFS
Reliefs apply to business assets and were introduced to encourage investment.
Several reliefs require to quality that the asset being disposed of must be used in a ‘trade’ or for shares be shares in a
‘trading company’.
- This is important as it denies relief to disposals of assets held for non-trading purpose – held as investment etc.
Roll-over relief on the Hold-over relief on gifts Roll-over relief on Business asset disposal relief – TCGA s169H-S
replacement of (+ gift element in sale at incorporation of a
qualifying business undervalue) of business business – TCGA
assets – TCGA ss152- assets – TCGA s165 and s162
159 Sch 7
What is it? Encourages businesses Available to those who Where a business is Applies only on disposal of certain business assets. Not all
to expand and thrive by disposes of business transferred by a sole business assets apply.
allowing CGT to be assets by way of gift or gift trader or individual
postponed when the by way of sale at an partnerships to a new
consideration obtained undervalue. or established
by disposal is applied to company in return for
acquire another It postpones the tax shares.
qualifying asset like a liability. Allows business
replacement. assets to be given away Roll-over relief given
without a tax charge on to allow any gain on
the donor (they have no disposal to be
proceeds to pay the tax). deferred. Postpones
the CGT given that no
cash has been
realised with which to
pay the tax.
Conditions Qualifying assets: 1. Gift or gift element. 1. business must be There has to be QUALIFYING BUSINESS DISPOSAL:
for relief to o S155 TCGA 2. Chargeable business transferred as a going
apply o Land, buildings, asset: concern. Sole trade or partnership interests:
and goodwill. o Used in donor’s trade - Carried on 1. disposal of the whole or part of a business:
o Must be used IN or his interest in the as the same o Business disposed as a going concern or
THE TRADE. asset. business o Assets are disposed of following cessation of the
o Company shares o Shares in trading just a business – provided the assets were used.
are NOT QA. company not listed. change of 2. The interest in the business as a whole must have been
o Fixed plant and o Shares in personal ownership. owned either – 2 years ending year of disposal or ending
machinery are QA trading company cessation.
but a sale of this even if listed. 2. The whole gain can 3. Only assets used for the purpose of the business
will rarely produce o Assets owned by SH be rolled over only if carried on by the individual or P are eligible.
a gain due to and used by his the consideration is all o Shares and securities and others held as investments
depreciation. Any personal trading in shares issued by are excluded.
roll over relief will company (5% the company. o Goodwill is excluded with conditions.
be restricted if they owned). - If 50% is in
are wasting assets Not apply to shares if shares then Company shares
– s154. donee is a company. you can roll- 1. Company shares may qualify if:
over 50% of o It is trading company and it’s his personal
Who must they be 3. Both the donor and the gain. company (5%) and either or both he is
owned by? donee must elect for relief beneficially entitled to 5% profits or in event of
o Sole trader used in to apply (as donee is 3. Business must be disposal of share capital he would be ben
his trade, taking on the CGT in the transferred with all of entitled to 5% proceeds AND
o Partnership used in future). This must be its assets, ignoring o Disponer is employee.
P trade, made no more than 4 cash.
o Individual partner years after end of tax year 2. Requirements of profit ability apply for 2 years ending
and used in P of the disposal. the disposal or the date company ceased to be a trading
trade, company – provided disposal was within 3 years of
o Individual SH and cessation.
used in trade of
that comp. Must be 3. Trading Company = must not have activities that include
SH ‘personal to a substantial extent activity other than trading ones.
company’ = they Restricts extent they can hold cash reserves or
must own 5% investments.
voting shares.
Associated disposals
Time-limits: 1. Sometime assets used are not owned by the business
The replacement must but by an individual. Disposals of these outside the
be acquired within one business might qualify if it was used for purpose of the
year before of 3 years business run either by:
after original disposal o Partnership where the individual was partner or
o Company in which individual’s shares qualify
Reliefs apply to business assets and were introduced to encourage investment.
Several reliefs require to quality that the asset being disposed of must be used in a ‘trade’ or for shares be shares in a
‘trading company’.
- This is important as it denies relief to disposals of assets held for non-trading purpose – held as investment etc.
Roll-over relief on the Hold-over relief on gifts Roll-over relief on Business asset disposal relief – TCGA s169H-S
replacement of (+ gift element in sale at incorporation of a
qualifying business undervalue) of business business – TCGA
assets – TCGA ss152- assets – TCGA s165 and s162
159 Sch 7
What is it? Encourages businesses Available to those who Where a business is Applies only on disposal of certain business assets. Not all
to expand and thrive by disposes of business transferred by a sole business assets apply.
allowing CGT to be assets by way of gift or gift trader or individual
postponed when the by way of sale at an partnerships to a new
consideration obtained undervalue. or established
by disposal is applied to company in return for
acquire another It postpones the tax shares.
qualifying asset like a liability. Allows business
replacement. assets to be given away Roll-over relief given
without a tax charge on to allow any gain on
the donor (they have no disposal to be
proceeds to pay the tax). deferred. Postpones
the CGT given that no
cash has been
realised with which to
pay the tax.
Conditions Qualifying assets: 1. Gift or gift element. 1. business must be There has to be QUALIFYING BUSINESS DISPOSAL:
for relief to o S155 TCGA 2. Chargeable business transferred as a going
apply o Land, buildings, asset: concern. Sole trade or partnership interests:
and goodwill. o Used in donor’s trade - Carried on 1. disposal of the whole or part of a business:
o Must be used IN or his interest in the as the same o Business disposed as a going concern or
THE TRADE. asset. business o Assets are disposed of following cessation of the
o Company shares o Shares in trading just a business – provided the assets were used.
are NOT QA. company not listed. change of 2. The interest in the business as a whole must have been
o Fixed plant and o Shares in personal ownership. owned either – 2 years ending year of disposal or ending
machinery are QA trading company cessation.
but a sale of this even if listed. 2. The whole gain can 3. Only assets used for the purpose of the business
will rarely produce o Assets owned by SH be rolled over only if carried on by the individual or P are eligible.
a gain due to and used by his the consideration is all o Shares and securities and others held as investments
depreciation. Any personal trading in shares issued by are excluded.
roll over relief will company (5% the company. o Goodwill is excluded with conditions.
be restricted if they owned). - If 50% is in
are wasting assets Not apply to shares if shares then Company shares
– s154. donee is a company. you can roll- 1. Company shares may qualify if:
over 50% of o It is trading company and it’s his personal
Who must they be 3. Both the donor and the gain. company (5%) and either or both he is
owned by? donee must elect for relief beneficially entitled to 5% profits or in event of
o Sole trader used in to apply (as donee is 3. Business must be disposal of share capital he would be ben
his trade, taking on the CGT in the transferred with all of entitled to 5% proceeds AND
o Partnership used in future). This must be its assets, ignoring o Disponer is employee.
P trade, made no more than 4 cash.
o Individual partner years after end of tax year 2. Requirements of profit ability apply for 2 years ending
and used in P of the disposal. the disposal or the date company ceased to be a trading
trade, company – provided disposal was within 3 years of
o Individual SH and cessation.
used in trade of
that comp. Must be 3. Trading Company = must not have activities that include
SH ‘personal to a substantial extent activity other than trading ones.
company’ = they Restricts extent they can hold cash reserves or
must own 5% investments.
voting shares.
Associated disposals
Time-limits: 1. Sometime assets used are not owned by the business
The replacement must but by an individual. Disposals of these outside the
be acquired within one business might qualify if it was used for purpose of the
year before of 3 years business run either by:
after original disposal o Partnership where the individual was partner or
o Company in which individual’s shares qualify
