CGT hold-over relief and the deferred pet

In last month’s issue of Trusts and Estates there was a discussion of the use of trusts, and other CGT disposals to crystallise entitlements to CGT reliefs. For the most part, the discussion centred on Tapering Relief at the Business Assets rate. However, similar considerations may apply where CGT holdover relief is in issue.

Last month’s article considered the case of John Doe, a solicitor who owned the office from which his firm carried on business, Blackletter Chambers. He proposed to retire but retained ownership of the office. Discussion centred around the loss of tapering relief as time elapsed and an ever decreasing proportion of the gain would be relieved at the “Business Assets” rate. However, a similar problem will arise in relation to hold-over relief under Section 165 TCGA 1992. As time goes on, after John Doe’s retirement, the apportionment formula in Paragraph 5 of Schedule 7 TCGA 1992 will reduce the proportion of the gain able to be held over, under Section 165 TCGA 1992, eg, on a future gift by John Doe. This may be a situation where a suitable trust will enable John Doe to clear the CGT and IHT on hurdles separately, by making the CGT disposal at a time when the entire gain will still be eligible for hold-over relief, and postponing the making of a PET, without reservation of benefit until a time when John Doe feels he will no longer need the income.