UK: Draft legislation providing capital gains tax gift holdover relief
Proposed to be effective April 6, 2027
HMRC on June 23, 2026, published draft legislation which would bring company assets that are subject to the intangible fixed assets (IFA) regime or that qualify for the substantial shareholding exemption (SSE) within the scope of the relief restriction calculation for capital gains tax (CGT) gift holdover relief given under s165 TCGA 1992—effective April 6, 2027. The measure was announced in the 2025 budget.
Relief under s165 defers some or all of the CGT liability on qualifying gifts or transfers at less than fair market value. In the case of a gift of shares in a trading company or trading group, the relief is restricted if the company or group holds “chargeable assets” that are not used for the purposes of the company or group’s trade. The restriction is calculated on a proportional basis (i.e., if 5% of the group’s chargeable assets are non-trade, then 5% of the gain will not be eligible for relief). Non-trade assets could include assets such as investment properties held within an otherwise trading company.
The current exclusion of IFAs and SSE assets from the restriction calculation can lead to mismatches in the tax treatment of shareholders in very similar companies. Goodwill created on or after April 1, 2002, falls within the IFA regime, but goodwill created before this date is a chargeable asset. This means that, in some cases, the amount of holdover relief available to a shareholder can vary purely based on when a company’s goodwill was created.
Read a July 2026 report prepared by the KPMG member firm in the UK