Holdover guidance

26 November 2008

Issue: 4186 / Categories: Forum & Feedback

A father wishes to transfer shares in the family company to his son, partly as a gift and partly for consideration. Which has priority, holdover relief or entrepreneurs' relief? The replies examine the law and instructions. There are conflicting views, although HMRC consider that holdover relief has priority.

I am advising a client on a potential transaction and I am struggling to find any guidance on the interaction of capital gains tax entrepreneurs' relief and holdover relief. My client wants his son to have some shares in the family trading company but he also wants some money as consideration. I have explained that market values will apply for capital gains tax. The father satisfies the conditions for entrepreneurs' relief; he holds 50% of the shares he is a director and the company is trading and has done so for many years. The gift element of the transaction would also qualify for holdover relief. The market value of the 23% stake which he is contemplating giving to his son is say £500 000 with a base cost of £5 000.

If the father receives £200 000 for the shares will capital gains tax...

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