PPR and Gift Holdover

Trusts Discussion
1

Client acquired property in 1998 and used it as their main residence until 2010. They then moved out, retaining ownership, and converted the property to business use for a business where they hold more than 50% of the shares. Client now wants to gift the property and has prepared a CGT holdover gain based on the present value and the original acqusition cost.

Normally the heldover gain would be apportioned between the period when the property was used as business property and the remainder, but in this instance the remainder of the period would be eligible for PPR relief. Should I still apportion by time and claim holdover relief on the reduced gain? The alternative would be to revalue at the date when use changed but there was no CGT disposal at that point so I presume this would not be correct.

2

Off-the-top-of-my-head thoughts:

  1. I doubt that a pre[s]ent value computation would be the correct way of ascertaining MV, but that exercise can be indefinitely postponed by ticking the relevant box on the claim form.
  2. Apportion the gain on a time basis into three periods: a) subject to PRR b) the business use period and c) any gaps
  3. Subject to gaps, the chargeable gain will be less than the business use gain owing to the final 9 months of ownership also being exempt.
  4. If there is an associated disposal of shares, consider BADR rather than holdover.
3

HMRC manuals CG64760 might be helpful :slight_smile:

CG64760 - Private residence relief: change in use - HMRC internal manual - GOV.UK