Capital Gains Tax Act 1979 (repealed 6.3.1992)

126 Relief for gifts of business assets. U.K.

[F1 (1) If—

(a) an individual (in this section referred to as “the transferor”) makes a disposal otherwise than under a bargain at arm’s length of an asset within subsection (1A) below, and

(b) a claim for relief under this section is made by the transferor and the person who acquires the asset (in this section referred to as “the transferee”) or, where the trustees of a settlement are the transferee, by the transferor alone,

then, subject to subsection (2) and sections 126A and 126B below, subsection (3) below shall apply in relation to the disposal.

(1A) An asset is within this subsection if—

(a) it is, or is an interest in, an asset used for the purposes of a trade, profession or vocation carried on by—

(i) the transferor, or

(ii) his family company, or

(iii) a member of a trading group of which the holding company is his family company, or

(b) it consists of shares or securities of a trading company, or of the holding company of a trading group, where—

(i) the shares or securities are neither quoted on a recognised stock exchange nor dealt in on the Unlisted Securities Market, or

(ii) the trading company or holding company is the transferor’s family company.]

(2) Subsection (3) below does not apply in relation to a disposal if—

(a) in the case of a disposal of an asset, any gain accruing to the transferor on the disposal is (apart from this section) wholly relieved under [F2 Schedule 20 to the Finance Act 1985], or

(b) in the case of a disposal of shares or securities, [F2 the appropriate proportion] determined under [F2 paragraph 7(2) or paragraph 8(2) of Schedule 20 to the Finance Act 1985] of any gain accruing to the transferor on the disposal is (apart from this section) wholly relieved under [F2 that Schedule][F3 or]

[F4 (c) in the case of a disposal of qualifying corporate bonds within the meaning of section 64 of the Finance Act 1984, a gain is deemed to accrue by virtue of paragraph 10(1)(b) of Schedule 13 to that Act, or

(d) subsection (3) of section 147A below applies in relation to the disposal (or would apply if a claim for relief were duly made under that section)].

(3) Where a claim for relief is made under this section in respect of a disposal—

(a) the amount of any chargeable gain which, apart from this section, would accrue to the transferor on the disposal, and

(b) the amount of the consideration for which, apart from this section, the transferee would be regarded for the purposes of capital gains tax as having acquired the asset or, as the case may be, the shares or securities,

shall each be reduced by an amount equal to the held-over gain on the disposal.

(4) Part I of Schedule 4 to this Act shall have effect for extending the relief provided for by virtue of subsections (1) to (3) above in the case of agricultural property and for applying it in relation to settled property.

(5) Subject to Part II of Schedule 4 to this Act (which provides for reductions in the held-over gain in certain cases) and subsection (6) below, the reference in subsection (3) above to the held-over gain on a disposal is a reference to the chargeable gain which would have accrued on that disposal apart from subsection (3) above and (in appropriate cases) [F2 Schedule 20 to the Finance Act 1985], and in subsection (6) below that chargeable gain is referred to as the unrelieved gain on the disposal.

(6) In any case where—

(a) there is actual consideration (as opposed to the consideration equal to the market value which is deemed to be given by virtue of [F5 section 29A(1)] above) for a disposal in respect of which a claim for relief is made under this section, and

(b) that actual consideration exceeds the sums allowable as a deduction under section 32 above,

the held-over gain on the disposal shall be the amount by which the unrelieved gain on the disposal exceeds the excess referred to in paragraph (b) above.

(7) Subject to subsection (8) below, in this section and Schedule 4 to this Act—

(a) “family company” [F6 , “holding company”, “trading company” and “trading group” have the meanings] given by [F2 paragraph 1 of Schedule 20 to the Finance Act 1985],

(b) [F7 “trading company” has the meaning given by paragraph [F8 7 of Schedule 19 to the Taxes Act 1988]], and

(c) “trade”, “profession” and “vocation” have the same meaning as in the Income Tax Acts.

(8) In this section and Schedule 4 to this Act and in determining whether a company is a trading company for the purposes of this section and that Schedule, the expression “trade” shall be taken to include the occupation of woodlands where the woodlands are managed by the occupier on a commercial basis and with a view to the realisation of profits.

[F9 (9) Where a disposal in respect of which a claim is made under this section is (or proves to be) a chargeable transfer for inheritance tax purposes, there shall be allowed as a deduction in computing (for capital gains tax purposes) the chargeable gain accruing to the transferee on the disposal of the asset in question an amount equal to whichever is the lesser of—

(a) the inheritance tax attributable to the value of the asset, and

(b) the amount of the chargeable gain as computed apart from this subsection,

and, in the case of a disposal which, being a potentially exempt transfer, proves to be a chargeable transfer, all necessary adjustments shall be made, whether by the discharge or repayment of capital gains tax or otherwise.

(10) Where an amount of inheritance tax—

(a) falls to be redetermined in consequence of the transferor’s death within seven years of making the chargeable transfer in question, or

(b) is otherwise varied,

after it has been taken into account under subsection (9) above, all necessary adjustments shall be made, whether by the making of an assessment to capital gains tax or by the discharge or repayment of such tax.]

Textual Amendments

F1 S. 126(1)(1A) substituted for s. 126(1) by Finance Act 1989 (c. 26, SIF 63:2), s. 124 and Sch. 14 para. 1(2)(3) in relation to disposals on or after 14 March 1989 (except where relief given under Finance Act 1980 (c. 48, SIF 63:1), s. 79 in respect of a disposal before that date)

F2 Words substituted by Finance Act 1985 (c. 54), s. 70(9) with respect to disposals on which relief falls to be due under Finance Act 1985 (c. 54), Sch. 20 from 6 April 1985

F3 Word inserted by Finance Act 1989 (c. 26, SIF 63:2), s. 124 and Sch. 14 para. 1(2)(3) in relation to disposals on or after 14 March 1989 (except where relief given under Finance Act 1980 (c. 48, SIF 63:1), s. 79 in respect of a disposal before that date)

F4 S. 126(2)(c)(d) inserted by Finance Act 1989 (c. 26, SIF 63:2), s. 124 and Sch. 14 para. 1(2)(3) in relation to disposals on or after 14 March 1989 (except where relief given under Finance Act 1980 (c. 48, SIF 63:1), s. 79 in respect of a disposal before that date)

F5 Words substituted by Finance Act 1981 (c. 35, SIF 63:2), s. 90(3)(a) in relation to acquisitions and disposals on or after 10 March 1981

F6 Words substituted by Finance Act 1989 (c. 26, SIF 63:2), s. 124 and Sch. 14 para. 1(4)(a) in relation to disposals on or after 14 March 1989 (except where relief given under Finance Act 1980 (c. 48, SIF 63:1), s. 79 in respect of a disposal before that date)

F7 Words repealed by Finance Act 1989 (c. 26, SIF 63:2), ss. 124, 187, Schs. 14 para. 1(4)(b) and 17 Part VII in relation to disposals on or after 14 March 1989 (except where relief given under Finance Act 1980 (c. 48, SIF 63:1), s. 79 in respect of a disposal before that date)

F8 Words substituted by Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29 para. 32

F9 S. 126(9)(10) added by Finance Act 1989 (c. 26, SIF 63:2), s. 124 and Sch. 14 para. 1(5) in relation to disposals on or after 14 March 1989 (except where relief given under Finance Act 1980 (c. 48, SIF 63:1), s. 79 in respect of a disposal before that date)

Modifications etc. (not altering text)

C1 See— Finance Act 1980 (c. 48, SIF 63:2), s. 79(4); Finance Act 1984 (c. 43, SIF 63:1), s. 50(1) and Sch. 11 para. 1

C2 See Finance Act 1988 (c. 39, SIF 63:1, 2), s. 97 and Sch. 9 para. 2(3)