ACCA Taxation (F6) Practice Exam

Which of the following assets qualifies for gift holdover relief?

1. Personal use assets

2. Shares in listed trading companies without any ownership percentage

3. Assets used in business without a minimum holding period

4. Cash holdings

The correct answer is: Assets used in business without a minimum holding period

Gift holdover relief allows for the deferral of Capital Gains Tax (CGT) on gifts of certain assets under specific conditions. The correct answer revolves around assets that are used in the course of a trade or business, which qualifies for this relief. When an asset is used for business purposes, it allows the donor to transfer the asset to another person without the immediate tax implications that would typically arise if such an asset were sold. The relief applies because the asset's value is expected to generate income or support ongoing operations in a business context, which aligns with the principles of encouraging business activity and promoting economic growth. Personal use assets do not qualify for gift holdover relief, as they are not used for a trade or business and are subject to CGT when they are disposed of. Shares in listed trading companies without any ownership percentage also do not qualify, as there is often a requirement for the shares to have a certain level of ownership to qualify for relief. Cash holdings are typically not considered for relief because they do not represent a capital asset subject to growth in value in the same manner as business assets. This understanding of the conditions for gift holdover relief is crucial for ensuring compliance with tax law and optimizing tax outcomes when transferring assets.