Proposed Changes to CGT Gift Holdover Relief

Owners of trading businesses planning to gift shares as part of a succession strategy may be affected by proposed changes to Capital Gains Tax (CGT) Gift Holdover Relief which are expected to be beneficial in many cases. Draft legislation published on 23 June 2026 revises the calculation used to determine the amount of relief which may be claimed where a company or group holds assets that are not used for its trade. Subject to enactment, the changes will apply to qualifying disposals made on or after 6 April 2027.

What is changing?

The current restriction formula compares the value of a company’s trading assets which are within the scope of tax on chargeable gains (‘chargeable assets’) with its total chargeable assets. This therefore does not fully account for assets within the Intangible Fixed Assets regime or for gains exempt under the Substantial Shareholding Exemption, which can produce unintended results.

The draft legislation amends this so that these assets enter the calculation. This may include certain goodwill created or acquired on or after 1 April 2002 and qualifying shareholdings held in subsidiary companies.

The aim is to restore the intended operation of the formula. Depending on the nature and use of these additional assets, the revised calculation could increase or reduce the relief available. Companies or groups whose assets consist only of trading assets should not be affected.

 How does Gift Holdover Relief work?

A gift of shares is generally treated as a disposal at market value for CGT purposes, even if no money changes hands. For a qualifying gift, Gift Holdover Relief may defer some or all of the gain: the recipient’s acquisition cost is reduced by the held-over amount, which may become chargeable when they later dispose of the shares. A claim will generally need to be made jointly by the donor and recipient.

Relief can be especially valuable when a family business passes to the next generation. However, where the company or group owns non-trading assets, the gain eligible for relief may be restricted.

Who may be affected?

The proposals are relevant where an individual gifts shares or securities in a trading company, or the holding company of a trading group, and the shares are either unlisted or are in the donor’s personal company.

They are likely to matter most to owner-managed and family businesses making transfers for retirement, succession or estate-planning purposes, particularly where the trading company holds investments, intellectual property, goodwill, property or interests in subsidiaries.

What should business owners do?

Before completing a gift, business owners should:

• Confirm that the shares and proposed transfer qualify for relief;
• Identify the company’s trading and non-trading activities and review how its assets are used;
• Consider any intangible fixed assets and qualifying substantial shareholdings;
• model the likely outcome under the existing and proposed calculations before choosing a transfer date; and
• Assess the CGT position alongside the commercial, succession and Inheritance Tax (IHT) implications.

As this proposed legislative measure remains in draft, its progress should be monitored before any transaction is finalised.

How we can help

At JS, our tax advisers can assess the effect of the proposed rules, compare the available timings and help develop a succession plan aligned with your family and commercial objectives.

Considering a gift of shares or a change in business ownership? Contact our Tax Advisory team at tax@teamjs.co.uk before taking action so we can model the tax outcome and help you choose the right approach.