Navigating Capital Gains Tax changes

When an individual made a gift of a business asset (perhaps shares in a trading company or perhaps the trading premises) in 2023/24, we sometimes process the actual claim for Taxation of Chargeable Gains Act (TCGA) 1992 s 165 relief with the Self Assessment tax return. This is often done automatically as the claim typically follows advice which has already been given.  

However, this year is a little different as Chancellor Reeves decided to increase the rate of Capital Gains Tax (CGT) on 30 October 2024 for high earners from 20% to 24%.  

We have come across a situation where the gain at stake is relatively minor, such that the tax liability is easily manageable. If the asset is destined to be sold / liquidated in the medium term then a client may prefer to pay tax at the rate applicable to the gift (say 20%, or even 10% under Business Asset Disposal Relief (BADR), if available) rather than see that gain be held over and then subsequently crystalised at 24%.

There is a four year window to submit a claim for 165 relief so tax paid on a 2023/24 gain could still be held over by a claim made as late as 5 April 2028.

If a claim has already been lodged all may not be lost. Although I can see that if a claim is lodged without a valuation of the asset transferred (i.e. the valuation is deferred, as frequently is the case) then once a claim has been accepted by HMRC, HMRC takes the view (per SP8/92) that it cannot subsequently be withdrawn. So 2023/24 claims can normally be varied within the enquiry window.  

In light of the increased main CGT rates, the increasing CGT rates under BADR (from April 2025), and the upcoming potential £1 m cap on BPR, something else to think about with clients is actively gifting (to individual recipients or into Trust) shares in personal trading companies to the next generation and choosing not to holdover. This could ‘bank’ the gain at a 10% BADR (if executed before 6 April) offering a low-cost step up to the recipient. As the gift starts the clock it potentially reduces future exposure to Inheritance Tax (IHT) both by the gifted shares and payment of the CGT.  

To discuss this, please contact Simon Warne or your usual Crowe contact.