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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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We have a family business which has been passed on from father

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We have a family business which has been passed on from father to son on the retirement of the father. This has happened for three generations, with no money being charged for the transfer.the present owner has had to take early retirement owing to illness and wishes to transfer the business to his sister.He has been told that he will be liable for capital gains tax on the business premises although no money has ever been involved.Howcan this be calculated when the property has never been valued since the 1970s when it was bought?


Does the present owner intend to give away the business premises as well as the business itself? Is the business run through a limited company or as a sole tradership? If it is run through a limited company, does the company own the business premises or it owned by the shareholder/director?

Customer: replied 3 years ago.

The present owner would like to transfer both business and premises. He is sole owner of both and is sole trader.


Leave this with me while I draft my answer.
Hi again.

Even though no cash is changing hands, there will be a disposal for Capital Gains Tax purposes when the present owner gives away the business and the business premises to his sister. The business goodwill and assets and the property will need to be valued. The transferor's cost for CGT purposes will be what the value of the business and the property were worth when he was gifted them.

In order to facilitate the continuation of a business which may not be possible if it results in a big tax liability, a joint election can be made by the parties concerned to holdover the gain until a future disposal by the new owner. Take a look at HS295 here for more information and a claim form.

It's also possible to make a claim for relief from Inheritance Tax on the gift of the business and business assets. You can read about that here.

I hope this helps but let me know if you have any further questions.
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