Business assets may be given to other members of the family. In this situation gift hold-over relief may be claimed. This allows the gain to be ‘held over’ so that the tax on it is deferred until the recipient sells the asset.
This generates cash-flow advantages.
Nigel has been a sole trader for many years operating in business as a mechanic. He wants to retire and pass the business to his son, so gives him his workshop.
He originally bought the workshop for £20,000 and at the date he gives it to his son it has a market value of £60,000. He makes a gain of £40,000.
The gain is held over. When his son sells the asset, his cost is the market value of £60,000 less the held-over gain of £40,000, i.e. £20,000.
The tax is deferred and there is nothing to pay by Nigel when making the gift of the workshop to his son.