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Q: My client is a sole trader running a garage business at several locations. At one location, there is a repair workshop used in the business with a flat above which is rented out to third parties. At the second location, there is a car showroom which was used for the business, apart from a short period when it was rented out to another business. Both of the premises will be gifted to his son and my client would like to know what tax relief might be available in relation to the gifts. My client will continue in business in other premises that he also trades from.

A: No Business Asset Disposal Relief is due since the trade has not ceased and continues. All that has happened is that an asset used in the trade has been disposed of. No new assets are being acquired so rollover relief will not be available. However, holdover relief may be due since the assets gifted to the son were used in the business.

S 165 TCGA 1992 enables a gain that would otherwise have been taxable to be held over and deducted from the base cost of the transferee’s acquisition value. The gain is therefore deferred and payable by the transferee on a later disposal and not by the donor at the time of the gift. Assets used in a trade, profession or vocation are generally eligible for the relief if a joint claim is made by the donor and donee.

The amount of holdover relief is restricted where the asset has not been used in the business for the entire period of ownership or it has been only partly used by the business. Para 5 Sch 7 TCGA 1992 states that the amount of the gain that can be held over is taken as the fraction A/B applied to the gain where:

  • A is the number of days of ownership where the asset was used in the business and
  • B is the number of days of ownership.

So for the car showroom, the gain that can be held over is limited to the proportion of the time that it was used in the business divided by the ownership period.

Para 6 Sch 7 TCGA 1992 applies a similar restriction where a building was only partly used for the business. So for the repair workshop with the flat above, the fraction of the gain relating to the repair workshop is relievable while the part relating to the non-business use remains liable to CGT without deferment. The fraction is to be determined on a just and reasonable basis.

The matter is discussed further in the HMRC manual at CG66886.


These publications from Markel Tax were correct at the time of going to press and should be considered as principles-based guidance only. To check current validity, call the Markel Tax helpline. ICAEW (as distributor) disclaims all liability for any errors or omissions.

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