Advanced Taxation (UK) · Capital gains tax and trusts

Gift Holdover Relief and Rollover Relief for ATX-UK

Updated 11 October 2026 · Fact-checked

Gift holdover relief defers a gain when you give away (or sell at undervalue) qualifying business assets; the donee takes a lower base cost. Rollover relief defers a gain on selling a business asset when you reinvest the proceeds in a qualifying asset within the time window. Proceeds not reinvested are taxed now.

Understand Gift Holdover Relief and Rollover Relief

Both reliefs defer a gain. They do not remove it. The gain is deducted from the base cost of another asset, so it comes back into charge when that asset is sold. The two reliefs deal with different situations, and that is the first thing to decide in any question.

Gift holdover relief (TCGA 1992 s165) applies when you give an asset away, or sell it for less than market value. Normally you are taxed on market value. With the relief, your gain is held over and the person receiving the asset takes it at market value less the held-over gain. The assets must be business assets. These include assets used in the donor's trade (or in the trade of their personal company), shares in an unquoted trading company, and shares in the donor's personal trading company, whether quoted or not.

For shares, the held-over gain is restricted if the company holds chargeable non-business assets. Only the proportion of the gain equal to the company's chargeable business assets divided by its total chargeable assets can be held over. The rest of the gain is chargeable now.

A separate gift relief also covers gifts that are immediately chargeable to inheritance tax, such as gifts into most trusts. It is not limited to business assets.

Rollover relief applies when you sell a qualifying business asset and buy another one. The asset sold and the asset bought must both be used in the trade. Qualifying classes include land and buildings, fixed plant and machinery, and (for unincorporated traders such as individuals and partners) goodwill. The new asset must be bought in the period from one year before to three years after the disposal. If you reinvest all the proceeds, the whole gain is rolled over. If you keep some proceeds, you are taxed now on the amount kept, up to the size of the gain.

The interaction with capital allowances matters. Rollover relief changes only the base cost for CGT. Capital allowances on new plant are still based on the actual cost, so the annual investment allowance and writing down allowances are not reduced.

A depreciating asset is one with a predicted life of 60 years or less. Fixed plant and machinery is included. If the new asset is a depreciating asset, the gain is not deducted from its base cost. It is frozen and becomes chargeable on the earliest of three events: the asset is sold, it stops being used in the trade, or ten years pass from acquisition.

The key difference: holdover is about who owns the asset next (a gift), and rollover is about what you buy next (a reinvestment).

Key rules to remember

Gain before relief: Gain = disposal value (market value for a gift) − allowable cost; Use market value for a gift or a connected-party sale. Use actual proceeds for an arm's length sale.
Gift holdover: gain held over (full gift): Held-over gain = full gain. For shares: full gain × chargeable business assets ÷ total chargeable assets of the company; For a gift of business assets other than shares, the donor's gain becomes nil. For shares, any part of the gain not held over because of chargeable non-business assets is chargeable now. The relief is claimed jointly by donor and donee, except for gifts into trust, where the donor alone claims. The claim deadline is four years after the end of the tax year of the disposal.
Gift holdover: sale at undervalue: Chargeable gain now = excess of actual proceeds over allowable cost, capped at the total gain. Held-over gain = total gain − chargeable gain now; If the proceeds are not above cost, the whole gain is held over.
Donee's base cost: Donee's base cost = market value at gift − held-over gain; This is the trap. The deferred gain is deducted from the donee's cost, so a larger gain is taxed when the donee sells.
Rollover: gain taxed now (part reinvestment): Chargeable now = proceeds not reinvested (limited to the gain); Proceeds not reinvested = disposal proceeds − cost of new asset.
Rollover: gain rolled over and new base cost: Rolled-over gain = total gain − chargeable now. New base cost = cost of new asset − rolled-over gain; This applies to non-depreciating assets such as land and buildings.
Rollover time limit: New asset bought from 1 year before to 3 years after the disposal; Both assets must be used in the claimant's trade.
Depreciating asset rule: A depreciating asset has a predicted life of 60 years or less (fixed plant and machinery is included). The gain is frozen until the earliest of: sale of the new asset, it ceasing to be used in the trade, or 10 years after acquisition; The new asset's base cost is not reduced.
Rates from the tax tables: CGT 18% (lower rate) and 24% (higher rate); annual exempt amount £3,000; BADR 14%; AIA 100% up to £1,000,000; The tables are given in the exam. Learn where they are, but still do the working.

How to solve Gift Holdover Relief and Rollover Relief questions

Use this order for any question on gift holdover or rollover relief.

1Identify the situation. A gift or sale at undervalue points to holdover. A sale followed by a purchase of a business asset points to rollover.
2Test the conditions. For gifts, check the asset is a qualifying business asset or the gift is chargeable to IHT. For rollover, check both assets are in a qualifying class, both are used in the trade, and the purchase is within the time window.
3Compute the gain before relief, using market value for gifts or connected parties and actual proceeds otherwise.
4Apply the relief. For holdover, find any gain taxed now (sale at undervalue) and the held-over amount. For rollover, find the proceeds not reinvested and the amount rolled over.
5Restrict for any non-business use or period of non-qualifying use, and watch for depreciating assets.
6Compute the new base cost: market value less held-over gain for the donee, or cost of the new asset less rolled-over gain for rollover.
7Deal with the rest of the question: the annual exempt amount, BADR on any chargeable part, rates, capital allowances on the new asset, and the claim date. Then give the advice asked for.

Quickest way: Three-line relief check

When to use it: Use it when time is short and you need the numbers and a defensible conclusion quickly.

Write the gain and label it: Value − cost = gain.
Write what is taxed now. For holdover it is proceeds above cost (for a pure gift this is nil). For rollover it is proceeds not reinvested, capped at the gain.
Write the new base cost: value or new asset cost − deferred gain. Add one line on capital allowances: new plant still gets allowances on its full cost.

Common mistakes in Gift Holdover Relief and Rollover Relief

Giving the donee a base cost equal to market value after holdover relief.
Students forget the held-over gain is deducted, because they treat the gift as a normal acquisition at market value.
Fix: Always write: donee's base cost = market value − held-over gain. Check it by asking whether the deferred gain will come back in on the donee's later sale.
Taxing the whole gain when only part of the proceeds is reinvested.
Students think rollover is all or nothing.
Fix: Tax now only the proceeds not reinvested, capped at the gain. Roll the rest into the new asset's base cost.
Treating fixed plant like a building and reducing its base cost.
Students miss that fixed plant is a depreciating asset.
Fix: Fixed plant is a depreciating asset, so the gain is frozen (not deducted) and comes back on the earliest of the three events. State the ten-year limit.
Reducing capital allowances because rollover relief was claimed.
Students think the lower base cost carries across to allowances.
Fix: Allowances run on the actual cost of the plant. Rollover affects only the CGT base cost.
Ignoring the sale-at-undervalue rule and holding over the entire gain.
Students see 'sale to a family member' and automatically treat it as a pure gift.
Fix: Compare actual proceeds with cost. Any excess of proceeds over cost is taxed now and only the balance is held over.
Missing the conditions, such as the one-year-before to three-years-after window, or business use.
Students go straight to the calculation.
Fix: Spend the first minute listing the conditions in the scenario. If one fails, say so and explain the effect on the answer.

Worked examples

Example 1

In December 2025 Ahmed, a sole trader, gives the freehold shop used in his trade to his daughter Priya. The shop cost £150,000 and its market value at the gift is £400,000. (a) Compute Ahmed's chargeable gain and Priya's base cost if a gift relief claim is made. (b) Repeat (a) if Priya instead pays Ahmed £220,000.

Show the solution

Gain before relief = £400,000 − £150,000 = £250,000.
(a) The shop is a qualifying business asset, and Ahmed and Priya make a joint claim. The whole £250,000 is held over, so Ahmed's chargeable gain is nil.
(a) Priya's base cost = £400,000 − £250,000 = £150,000.
(b) The sale is at undervalue, so the gain is still computed on market value: £250,000.
(b) Proceeds of £220,000 exceed cost of £150,000 by £70,000. This amount is chargeable now.
(b) Held-over gain = £250,000 − £70,000 = £180,000.
(b) Priya's base cost = £400,000 − £180,000 = £220,000. (Check: this equals what she paid.)

Answer: (a) Ahmed's gain is nil. Priya's base cost is £150,000. (b) Ahmed has a chargeable gain of £70,000 (before the annual exempt amount) and £180,000 is held over. Priya's base cost is £220,000.

Example 2

Beatrice, a sole trader, sold a factory in 2025/26 for £600,000. It cost £200,000. Eight months later she bought a workshop for £520,000 for use in her trade. (a) Compute the gain chargeable now and the base cost of the workshop. (b) What changes if the £520,000 had instead been spent on fixed plant and machinery, and what capital allowances are available?

Show the solution

Gain on the factory = £600,000 − £200,000 = £400,000.
(a) The workshop is bought within the window (one year before to three years after), is land and buildings and is used in the trade, so rollover relief is available.
(a) Proceeds not reinvested = £600,000 − £520,000 = £80,000. This is below the gain, so £80,000 is chargeable now.
(a) Gain rolled over = £400,000 − £80,000 = £320,000.
(a) Base cost of the workshop = £520,000 − £320,000 = £200,000.
(b) Fixed plant is a depreciating asset. The chargeable £80,000 is the same, and £320,000 is frozen, not deducted from the plant's cost.
(b) The frozen gain becomes chargeable on the earliest of: sale of the plant, it ceasing to be used in the trade, or ten years after acquisition.
(b) Capital allowances are based on the £520,000 cost. As the annual investment allowance has a limit of £1,000,000 at 100%, the whole cost can be relieved if the allowance is not used elsewhere.

Answer: (a) £80,000 is chargeable now (before the annual exempt amount). £320,000 is rolled over and the workshop has a base cost of £200,000. (b) The same £80,000 is chargeable now, but the £320,000 is frozen, not deducted from base cost, and becomes chargeable on the earliest of the three events above. The plant qualifies for the AIA on its full £520,000 cost.

Exam tips

Name the relief and list the conditions in the first lines of your answer. Marks are given for stating that the asset qualifies, not only for the numbers.
Show a base cost working for the donee or the new asset. The examiner is checking you know the gain comes back into charge later.
Watch for part-reinvestment wording, such as 'spent £x of the proceeds'. This almost always means part of the gain is taxable now.
If a question asks which relief or planning route to use, compare tax now versus tax later, and mention cash-flow and the claim deadline.
Use the tax tables for CGT rates, the annual exempt amount and AIA limits. Do not rely on memory for the figures.

Practice questions from Capital gains tax and trusts

Gift Holdover Relief and Rollover Relief in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

ACCA Applied SkillsGift Holdover Relief

Gift Holdover Relief and Rollover Relief: frequently asked questions

What is the difference between holdover relief and rollover relief?

Holdover relief applies when you give away a qualifying asset, or sell it for less than market value, and the donee takes over the deferred gain through a lower base cost. Rollover relief applies when you sell your own business asset and reinvest the proceeds in another. In both cases the gain is deferred, not removed.

What are the section 165 conditions for gift holdover relief?

The asset must be a business asset, such as an asset used in the donor's trade or in their personal company's trade, or shares in an unquoted trading company (or in the donor's personal trading company). The donor and donee must jointly elect, unless the gift is into a trust, where the donor alone claims. The claim must be made within four years of the end of the tax year of the gift.

How do I calculate rollover relief with part reinvestment?

Find the proceeds not reinvested (sale proceeds less cost of the new asset). That amount, up to the size of the gain, is taxed now. The rest of the gain is deducted from the base cost of the new asset. For depreciating assets the remaining gain is frozen instead.

Does rollover relief reduce my capital allowances?

No. Capital allowances are worked out on the actual cost of new plant and machinery. Only the CGT base cost of the new asset is reduced by rollover relief, and only for non-depreciating assets.