A significant aspect of Capital Gains Tax (CGT) business asset gift relief is changing for disposals made on or after 6 April 2027. The change affects individuals gifting shares or securities in a trading company, or holding company of a trading group, where that business is owned by the donor or where the shares are unlisted.
Business asset gift relief is regularly used as part of family business succession planning and intergenerational transfers of company ownership. While the changes are not due to take effect until April 2027, business owners with non-trading assets should review their arrangements now to understand whether future transfers could become more or less tax-efficient.
What is business asset gift relief?
Using business asset gift relief, an individual can hold over the capital gain which comes from gifting certain qualifying business assets. The gain is transferred to the recipient of the gift and only needs to be paid when they dispose of the asset at some point in the future. The donor and recipient make a joint claim for relief.
It can allow qualifying business assets to be gifted without triggering an immediate CGT liability, enabling the tax-efficient transfer of wealth and ownership between generations. In addition to certain shares, as above, it can also apply to business assets, including property and machinery and agricultural property.
What are the changes?
Under the current rules, gift relief can be restricted where qualifying shares are gifted and the company holds any chargeable non-business assets. Broadly, these are assets that are not used for trading purposes and could trigger a capital gain subject to corporation tax if sold.
When calculating the amount of relief available, HMRC applies a formula that compares chargeable business assets with the company’s total chargeable assets.
Currently, assets that qualify for the Substantial Shareholding Exemption (SSE) or are within the Intangible Fixed Assets (IFA) regime are excluded from this calculation because there is no charge to corporation tax under the chargeable gains’ regime when they are disposed of. As a result, their value does not appear within the formula at all.
As announced in the 2025 Autumn Budget, HMRC intends to change this from 6 April 2027. From this date, both assets that are within the IFA regime and those which qualify for SSE will now be included within the definition of chargeable assets and therefore be within the calculation of chargeable business assets to total assets. This change in calculation parameters may therefore affect the amount of gain which can benefit from a claim to business asset gift relief. This will then determine the amount of CGT due on the gift before and after April 2027.
The practical impact will depend on how those assets are used. Where they are used for business purposes, more gift relief may be available than under the current rules. Where they are not used for business purposes, less relief may be available.
Those who are most likely to be affected by the changes are individuals gifting shares in a qualifying company where:
- the underlying assets of which would qualify for SSE; or
- there is substantial value in intangible assets held within the company whose shares are being gifted.
What should businesses consider?
Although the changes don’t come into effect until April 2027, reviewing succession plans and ownership structure now can help with identifying whether it would be more beneficial to make gifts before or after the change. Areas to consider include:
- Assessing the profile of business assets – Reviewing balance sheets and the corporate structure can help with identifying the future availability of business asset gift relief, depending on the mix of trading and non-trading assets held within the company.
- Considering the impact of intangible assets – Businesses who hold intangible assets such as IP should assess whether these assets could affect future calculations for holdover relief.
- Reviewing succession plans – Business owners who were considering transferring shares in the coming years may wish to assess whether completing transactions before or after April 2027 could provide a more favourable outcome.
- Coordinating CGT and Inheritance Tax planning - The changes come at a time when many business owners are already reviewing succession strategies in response to reforms to Business Property Relief (BPR) and Agricultural Property Relief (APR). Rather than considering these changes in isolation, it is increasingly important to take a joined-up approach to CGT and Inheritance Tax planning to ensure ownership structures remain both commercially effective and tax efficient.
We’re here to help
The forthcoming changes are complex and their impact will depend on your business structure, asset profile and succession objectives.
If you are unsure whether the changes could affect you or would like advice on ensuring your succession plan remains tax-efficient, speak to your usual Azets adviser or a member of our specialist team using the form below.
