HMRC has published draft legislation to reform Capital Gains Tax relief for gifts of qualifying business assets, with changes to the gift holdover relief calculation set to apply to disposals made on or after 6 April 2027.
The UK’s His Majesty’s Revenue and Customs (HMRC) has published a policy paper and draft legislation setting out reforms to the Capital Gains Tax (CGT) relief available for gifts of business assets.
The policy paper, published on 23 June 2026, affects individuals making gifts of shares or securities in a trading company or the holding company of a trading group where the company is the transferor’s personal company or the shares or securities are unlisted.
Changes to gift holdover relief
Under the proposal, assets that qualify for the substantial shareholding exemption (SSE) or are subject to the intangible fixed assets (IFA) regime will be incorporated into the formula used to restrict gift holdover relief where a company or group holds assets that are not used for the purposes of its trade.
HMRC said the amendment restores the operation of the restriction formula to how it worked before the introduction of the SSE and IFA regimes, removing distortions that can arise when calculating the amount of holdover relief available.
The draft legislation amends paragraph 7(2)(b) of Schedule 7 to the Taxation of Chargeable Gains Act (TCGA) 1992. It will treat as “chargeable assets” those assets that would otherwise be chargeable but are exempt because they fall within the SSE or IFA regime, including goodwill created or acquired on or after 1 April 2002.
Existing legislative framework
Current provisions governing the relief are contained in:
- Sections 165 to 169G of the Taxation of Chargeable Gains Act 1992, covering gift of business asset holdover relief.
- Paragraph 7 of Schedule 7 to TCGA 1992, governing reductions in held-over gains on the disposal of shares.
- Section 192A and Schedule 7AC to TCGA 1992, providing the substantial shareholding exemption.
- Section 752 of the Corporation Tax Act 2009, covering corporation tax on non-trading gains on intangible fixed assets.
Impact on taxpayers
HMRC said the measure primarily affects individuals transferring qualifying shares, such as shares in their own personal company, as part of succession planning.
The department said there will be no effect where the relevant company or group holds only trading assets.
Where companies also hold non-trading assets, the revised calculation may produce different outcomes. Holdover relief will become more generous where the additional assets included in the calculation are mainly trading assets, while it will be less generous where they are mainly non-trading assets.
HMRC expects the measure to have no significant macroeconomic impact and does not anticipate any impact on businesses, civil society organisations or the department’s administrative processes.
Equality assessment
HMRC said the measure could affect individuals regardless of protected characteristics but noted that the population liable for CGT is estimated to include a higher proportion of people aged 45 to 74, particularly those aged 55 to 64, and a higher proportion of men than the overall UK adult population.
The department said it does not currently hold sufficient data on other protected characteristics to determine whether further equality impacts exist.
Fiscal impact and implementation
The Exchequer impact has not yet been quantified. HMRC said the final costing will be scrutinised by the Office for Budget Responsibility and published at a future fiscal event.
The changes, first announced at Budget 2025, will take effect for disposals made on or after 6 April 2027 and are due to be included in this year’s Finance Bill.
