LLM8230 - Capital gains: Names: relief for gifts of business assets

Relief for gifts of business assets is available when business assets are disposed of other than in bargains at arm’s length (TCGA92/S165). Where syndicate capacity reverts to a managing agent, this may be treated as a bargain otherwise than at arm’s length if the Name and managing agent are connected persons. Under the current Lloyd’s rules for transferring syndicate capacity, all other transfers are through the auction process or bilateral arrangements, and will generally be arm’s length bargains.

Where syndicate capacity is transferred to a successor corporate or SLP member of Lloyd’s, the transfer may be other than at arm’s length where the Name and the successor are connected persons. TCGA92/S17 treats any disposal and acquisition made otherwise than by way of a bargain at arm’s length as taking place for a consideration equal to the market value of the asset. TCGA92/S165 provides for gift hold-over relief to defer the consequent gain in whole or in part. If capacity is transferred by a Name to a Nameco under the Name’s control, then the consideration given will be the market value of the capacity at the date of transfer, because TCGA92/S18 invokes the market value rule in TCGA92/S17 for transfers between connected persons.

Depending on the timing of the transfer, relief under business assets gift relief may need to be restricted in accordance with section TCGA92/S165 (7). See CG66976 for more details ( LLM10000). This restricts relief where actual consideration is given in exchange for a transfer of business assets. HMRC’s view is that if a Name already has shares in a Nameco, and subsequently transfers capacity to the Nameco without receiving any further shares, the restriction will not apply as no actual consideration has been received in exchange for the capacity. All that has happened is that the value of the existing shareholding has been enhanced.

Gift relief and intangible fixed assets: F2A 2005

F2A05 amended FA02/SCH29/PARA92, and introduced new sub-paragraph (4C) in relation to intangible fixed assets (IFAs) transferred on or after 16 March 2005. Where gift relief under section TCGA92/S165 is claimed in respect of an IFA transferred to a company, the transfer is treated for Schedule 29 purposes as taking place at market value less the amount of the held- over gain. This does not affect the tax position of the person who transfers the asset, but it ensures that a sum equal to the held-over gain is eventually taxed on the company under Schedule 29. Syndicate capacity held by companies is within FA02/SCH29 ( LLM4180), and this rule will therefore apply to transfers of syndicate capacity transferred to a company on conversion ( LLM6050). In most cases, however, converting Names are likely to make use of the roll-over relief available on conversion ( LLM6160), which requires the capacity to be transferred in consideration for shares in the Nameco or other conversion vehicle, rather than gifting the capacity to the company.