ACCA Advanced Taxation (ATX) Practice Exam

Is CGT gift holdover relief available only to UK residents?

1. Yes, it is only for UK residents

2. No, it is available for all taxpayers

3. It depends on the value of the gift

4. It is not available in any case

The correct answer is: Yes, it is only for UK residents

The assertion that Capital Gains Tax (CGT) gift holdover relief is only available to UK residents is grounded in the specific rules governing this tax relief in the UK tax system. Gift holdover relief allows individuals to defer the CGT liability that arises when they transfer an asset to someone else (as a gift) by allowing them to pass on the gain to the recipient. This relief is designed to make it easier for taxpayers to gift assets without the immediate financial burden of capital gains tax. However, it is limited to UK residents due to the particular tax framework that applies to UK tax law. The rationale is that UK tax provisions, such as gift holdover relief, are applicable primarily to individuals who are subject to UK tax laws, hence limiting its benefits to those who reside in the UK. In contrast, other responses imply scenarios that do not align with tax regulations. For instance, suggesting that the relief is available to all taxpayers overlooks the fact that only residents benefit from this specific relief under UK tax laws. Furthermore, stating it depends on the value of the gift or that it is not available in any case introduces confusion about the thresholds and applicability outlined by the HMRC, which clearly state the residency requirement.