Define what is passing and why
This guide concerns an individual giving existing shares in a UK private family company to an adult child, using guidance checked on 8 November 2026. New share issues, trusts, minors and overseas recipients require separate analysis. Establish whether the objective is ownership succession, rewarding work, future growth participation or extracting value for the parent.
Record voting, dividend and capital rights, any restrictions and the wider shareholdings. A small percentage can have rights that differ materially from a simple percentage of the whole business. Discuss governance and the parent’s future income alongside tax.
A gift can create a CGT disposal without sale proceeds
TCGA 1992 sections 17 and 18 can substitute market value for actual consideration on a gift or connected-person transaction. Do not assume a nominal transfer price limits the gain. Value the particular holding and identify the donor’s allowable cost, including adjustments from earlier relief claims.
Prepare current accounts, forecasts, asset information and the share documents for the valuation. Company value and the tax value of the holding transferred are not necessarily the same calculation.
Hold-over relief depends on the company and the transaction
TCGA 1992 section 165 can defer qualifying business-asset gains. For shares, consider whether the company is a trading company or holding company of a trading group and whether the listing and ownership conditions are met. An investment company should not be assumed to qualify because it is family-owned. Review non-business assets and any restriction to the gain eligible for relief.
The donor and individual recipient normally claim jointly. Relief reduces the recipient’s acquisition cost, carrying the deferred gain forward. Consideration received can leave part of a gain immediately chargeable. Residence and other statutory restrictions require checking before completion. Do not treat a possible CGT claim as confirmation of IHT relief.
Hypothetical comparison: a deferred gain remains relevant
Assume the transferred shares are valued at £300,000 and their allowable cost is £60,000. With no consideration and ignoring costs, the gain before relief is £240,000. If the whole gain qualifies and a valid hold-over claim is made, the recipient’s illustrative acquisition cost becomes £60,000 rather than £300,000.
A later sale at £360,000 would then produce a £300,000 gain before further adjustments, rather than £60,000. This demonstrates deferral, not elimination. Eligibility is assumed only to explain the arithmetic; these are not client facts or promised savings.
A child who works in the company needs an employment review
ITEPA 2003 section 421B contains a broad employment-related securities framework and a specific domestic, family or personal relationship exception. HMRC ERSM20220 gives its interpretation: genuine family succession can fall within the exception even where children are employees, but the reason for the gift is a factual question.
Distinguish family succession from remuneration or an incentive for services. Keep evidence of the purpose and compare treatment of working and non-working family members. Where the employment rules apply, review valuation, restrictions, elections, payroll and reporting before executing the transfer. Family status alone is not clearance from those rules.
Agree the whole succession plan before signing
Confirm rights and valuations, model the CGT position and claims, assess employment involvement and obtain a separate IHT review of the actual gift and retained arrangements. Coordinate the transfer documentation, company records and any tax reporting with legal advisers. Ensure both generations understand future control, distributions and the latent gain.
Where the donor needs sale proceeds, compare a genuine sale or staged succession rather than labelling a payment arrangement a gift. Review the implications again before a later sale or departure from the UK. UA Tax supports London and UK-wide owners through business succession planning and shareholder tax advice. Book a Tax Consultation or Get in Touch before committing.
For advice on your own circumstances, see our Business succession planning service and agree the scope before acting.
Official sources and further reading
These primary sources support the framework above. Check the current version before acting because tax law and HMRC guidance can change.