Advanced Taxation (UK) · Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities

Gift Holdover Relief and Rollover Relief for ACCA ATX

Updated 11 October 2026

Gift holdover relief (s165) lets a donor and donee jointly defer a gain on a gift of qualifying business assets. Rollover relief (s152) defers a gain when sale proceeds of a business asset are reinvested in a new qualifying asset. In both, the deferred gain reduces the new base cost.

Understand Gift Holdover Relief and Rollover Relief

Both reliefs defer a gain. They do not remove it. The deferred gain is deducted from the base cost of another asset. The gain then comes back into charge when that asset is sold, unless a further relief applies.

Gift holdover relief applies when you give away (or sell at undervalue) a qualifying asset. A gift is a disposal at market value, so a gain arises even though no cash is received. Holdover removes the donor's tax on that gain. The donee takes the asset at market value less the held-over gain. The donee therefore picks up the deferred gain.

Qualifying assets for s165 are assets used in the donor's trade (or their personal company's trade), shares in an unquoted trading company, shares in a quoted trading company where the donor holds at least 5% of the votes (a personal company), and qualifying agricultural property. For shares, the company must be a trading company or the holding company of a trading group. Relief is restricted where the asset has been used partly for non-business purposes. For shares, it is also restricted where the company holds chargeable non-business assets. Only the business-asset part of the gain can be held over. Separately, s260 gives holdover for any asset where the gift is immediately chargeable to inheritance tax, for example a gift into a discretionary trust. Both parties must make a joint election. For gifts into trust, only the donor needs to elect.

Rollover relief (replacement of business assets, s152) applies when you sell a qualifying business asset and buy a replacement. Old and new assets must both be in qualifying classes and used in the trade. For an individual this means land and buildings, fixed plant and machinery, and goodwill. The new asset must be bought in the period from one year before to three years after the sale. The gain is deducted from the base cost of the new asset.

If you do not reinvest all the proceeds, the gain is chargeable now up to the amount not reinvested. The rest is rolled over. Depreciating assets are assets with a predicted life of 60 years or less. They include fixed plant and machinery with a life of 60 years or less, and a lease with 60 years or less to run. If the replacement is a depreciating asset, the gain does not reduce its base cost. The gain is held over and comes back into charge on the earliest of: sale of the replacement, it ceasing to be used in the trade, or ten years after its acquisition. If you buy a non-depreciating qualifying replacement asset before that event, you can transfer the held-over gain against it. This postpones the charge, and the gain is then deducted from the base cost of that new asset.

Key rules to remember

Gift holdover: donee base cost: Donee base cost = market value at gift − held-over gain; Where the gift is a pure gift, the whole gain eligible for relief is held over. The donee's gain on a later sale is therefore larger.
Gift at undervalue: gain chargeable now: Chargeable now = lower of (gain eligible for relief) and (actual proceeds − donor's allowable cost), plus any non-business part of the gain; Chargeable now is the excess of actual proceeds over the donor's allowable cost, capped at the gain eligible for relief. Any non-business part of the gain is also chargeable now. If proceeds do not exceed cost, nothing of the eligible gain is chargeable now and all of it is held over. Held-over gain = eligible gain − gain chargeable now. First restrict the gain for non-business use of the asset, or for chargeable non-business assets held by the company in a share gift.
Rollover: gain chargeable now: Chargeable now = lower of (gain) and (proceeds − amount reinvested); Only the unreinvested proceeds trigger a charge. Compare it with the total gain.
Rollover: new asset base cost: New base cost = cost of new asset − rolled-over gain; Rolled-over gain = total gain − gain chargeable now. This applies to non-depreciating replacement assets. For a depreciating asset the gain is held over and the base cost is not reduced.
Rollover time window: Reinvest from 12 months before to 36 months after the disposal; Check dates in the scenario carefully.
CGT rates and annual exempt amount (2025/26): 18% lower rate, 24% higher rate, annual exempt amount £3,000; Use the tax tables provided in the exam. Apply the annual exempt amount to gains chargeable now.

How to solve Gift Holdover Relief and Rollover Relief questions

Use this order for any deferral question. It keeps the marks flowing even if you misjudge one condition.

1Identify who disposes, what asset it is and how it is used (trade, personal company, investment). Say whether it is a gift or a sale.
2Compute the gain on the disposal in the normal way: market value or proceeds less allowable cost.
3Choose the relief and test the conditions: qualifying asset class, trade use, joint election for gifts, and reinvestment window for rollover. State each test in one line.
4Work out any part of the gain that cannot be deferred: unreinvested proceeds for rollover, or consideration above cost for an undervalue gift. Also restrict for any non-business use.
5Compute the gain deferred and the new base cost of the replacement asset or of the donee's asset.
6Compute tax on any gain still chargeable: annual exempt amount, then 18% or 24% according to the taxpayer's income. Use the tax tables.
7Comment on the effect: the tax is deferred, not saved. Mention cash flow and the larger future gain, and apply it to the client's objectives.

Quickest way: Deferral in four lines

When to use it: When time is short and you must show the conditions and the numbers quickly.

Line 1: gain = proceeds (or market value) − cost.
Line 2: relief available? Name the section, list the conditions and tick each from the facts.
Line 3: gain deferred = gain − gain chargeable now. For rollover, chargeable now is the lower of the gain and the unreinvested proceeds.
Line 4: new or donee base cost = asset value − deferred gain. Then tax on any gain chargeable now after the annual exempt amount.

Common mistakes in Gift Holdover Relief and Rollover Relief

Claiming gift holdover on a gift of a quoted share holding in a company where the donor is not in a personal company, or on residential investment property.
Students remember that shares are eligible and forget the conditions.
Fix: For shares, check the company is a trading company (or holding company of a trading group). Then check it is unquoted, or quoted with the donor holding at least 5% of the votes. Restrict the relief if the company holds chargeable non-business assets. Investment property does not qualify unless s260 applies (an immediately chargeable gift).
Forgetting that the donee must also elect.
The donor is the taxpayer in the question, so the donee is overlooked.
Fix: State that the claim is a joint election by donor and donee, except for transfers to trustees where only the donor elects.
Not reducing the new asset's base cost by the rolled-over gain.
Students stop once the donor's or seller's tax is computed.
Fix: Always compute the new base cost as a final step and say that the gain is deferred, not exempt.
Rolling over the whole gain when part of the proceeds was not reinvested.
Students compare the cost of the new asset with the old cost instead of with the proceeds.
Fix: Compare proceeds with the amount reinvested. The gain chargeable now is the lower of the gain and the unreinvested proceeds.
Treating fixed plant and machinery or a short lease as an ordinary replacement and reducing base cost.
The depreciating asset rule is missed.
Fix: For depreciating assets the gain is held over, not deducted from base cost. It is chargeable on the earliest of sale, ceasing trade use, or ten years after acquisition. If a non-depreciating replacement is bought before that event, the held-over gain can be transferred to it, which postpones the charge.
Using the wrong reinvestment window or ignoring the trade-use condition for the new asset.
Students recall only the three years after the disposal.
Fix: Write the window as one year before to three years after. The new asset must be brought into use in the trade on acquisition.

Worked examples

Example 1

In 2025/26, Asha gave her friend Ben an unquoted trading company shareholding which she had bought for £50,000. It was worth £200,000. Ben paid £80,000 for the shares. Asha and Ben wish to claim gift holdover relief. Compute the gain chargeable on Asha now, the gain held over and Ben's base cost.

Show the solution

Gain before relief: market value £200,000 − cost £50,000 = £150,000. Market value is substituted for the actual proceeds because the transaction is not a bargain at arm's length (there is a gift element). This is so whether or not the parties are connected.
The shares qualify (unquoted trading company). A joint election is made.
The amount chargeable now is the excess of actual proceeds over Asha's cost, capped at the gain eligible for relief. Proceeds of £80,000 less cost of £50,000 = £30,000. This is lower than the total gain of £150,000, so £30,000 is chargeable now.
Gain held over = total gain − gain chargeable now = £150,000 − £30,000 = £120,000.
Ben's base cost = market value £200,000 − held-over gain £120,000 = £80,000.
Asha's £30,000 is reduced by her annual exempt amount of £3,000 if unused, leaving £27,000 taxable at 18% or 24% as appropriate.

Answer: Chargeable on Asha now: £30,000 (before annual exempt amount). Gain held over: £120,000. Ben's base cost: £80,000.

Example 2

In August 2026, Priya, a sole trader and higher rate taxpayer, sold a factory used in her trade for £600,000. It cost £250,000. In December 2026 she bought a new factory for £540,000 and used it in the trade. She has no other gains and has not used her annual exempt amount. Compute her CGT and the base cost of the new factory.

Show the solution

Gain on old factory = £600,000 − £250,000 = £350,000.
Both assets are land and buildings used in the trade. The purchase is within the window of one year before to three years after the sale. Rollover relief is available.
Proceeds not reinvested = £600,000 − £540,000 = £60,000. This is lower than the gain of £350,000, so £60,000 is chargeable now.
Gain rolled over = £350,000 − £60,000 = £290,000.
Taxable gain = £60,000 − annual exempt amount £3,000 = £57,000.
CGT = £57,000 × 24% = £13,680 (higher rate taxpayer).
Base cost of new factory = £540,000 − £290,000 = £250,000.

Answer: CGT payable is £13,680. The rolled-over gain is £290,000 and the new factory's base cost is £250,000.

Exam tips

Write the section names and conditions as short ticks against the facts. Marks are given for stating and applying each condition.
Always say what happens to base cost. Examiners expect you to point out that tax is deferred, not removed.
Check dates for rollover. A scenario often places the purchase just outside the three-year window or for an asset that is not used in the trade.
In a planning question, compare reliefs. Gift holdover defers a gain on a gift. Rollover defers on a sale and reinvestment. Link to inheritance tax and cash flow where the facts allow, and give the client a clear recommendation.
Use the CGT rates and annual exempt amount from the tax tables. Do not recall them from memory.

Practice questions from Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities

Gift Holdover Relief and Rollover Relief: frequently asked questions

What is the difference between gift holdover relief and rollover relief?

Gift holdover applies to a gift or undervalue sale of a qualifying asset and the donee takes the deferred gain through a lower base cost. Rollover applies when the owner sells a business asset and buys a replacement, and the owner's new asset takes the lower base cost. Gift holdover needs a joint election. Rollover is claimed by the person who sold and reinvested.

What are the conditions for gift holdover relief under s165?

The asset must be a qualifying business asset, such as an asset used in a trade, or shares in an unquoted trading company or in a trading company where the donor holds at least 5% of the votes. The company must be a trading company or the holding company of a trading group. The relief is restricted for non-business use, or where the company holds chargeable non-business assets. Qualifying agricultural property also qualifies. The donor and donee must elect jointly. Separately, s260 covers gifts that are immediately chargeable to inheritance tax.

What is the reinvestment period for rollover relief?

The new asset must be acquired from one year before to three years after the disposal of the old asset. It must be a qualifying asset and be used in the trade. Anything not reinvested produces a chargeable gain now.

Does rollover relief remove the gain?

No. The gain is deducted from the new asset's base cost, so it is deferred. For depreciating assets it is held over and comes back into charge at the earliest of the three triggering events. It can be postponed further if you buy a non-depreciating replacement asset before that event. Planning should mention that deferral improves cash flow but does not remove the liability.