ACCA Advanced Taxation (ATX) Practice Exam

Which of the following qualifies for gift holdover relief?

1. Assets used in a non-trading company

2. Residential property

3. Shares in an unquoted trading company

4. Cash gifts to individuals

The correct answer is: Shares in an unquoted trading company

Gift holdover relief allows for the deferral of Capital Gains Tax (CGT) that would normally arise on the disposal of certain gifts of assets. This relief is designed to prevent immediate tax liability when assets are transferred without consideration. The option concerning shares in an unquoted trading company qualifies for gift holdover relief because such shares typically meet the criteria outlined in tax regulations. Specifically, they are considered business assets, which are eligible for relief. This allows the donor to hold over the gain on the shares until the recipient disposes of the shares in the future. Assets used in a non-trading company generally do not qualify because they do not meet the trading condition necessary for relief. Residential property, while potentially qualifying for certain reliefs such as Private Residence Relief, typically does not qualify for gift holdover relief unless specific conditions are met. Cash gifts to individuals do not qualify for this relief, as gift holdover is primarily associated with physical assets or shares where a gain might be deferred rather than cash transfers, which are immediately realized. Thus, shares in an unquoted trading company are the correct answer, as they meet the necessary conditions for gift holdover relief under the applicable tax laws.