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Chapter CG66623

Document Cited authorities 1 Cited in Related
Vincent
Published date12 March 2016
Record NumberCG66623
CourtHM Revenue & Customs
IssuerHM Revenue & Customs

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When someone becomes absolutely entitled to trust assets TCGA92/S71(1) treats the trustees as having disposed of, and reacquired, the assets as bare trustees at their market value. See CG37000+. If the person who becomes absolutely entitled is a charity TCGA92/S257(3) treats the trustees as having disposed of and reacquired the assets as bare trustees for an amount which gives them neither a gain nor a loss. If only some proportion of the assets is held for a charity you apply a no gain/no loss result to a corresponding proportion of each of the assets.

There are two exceptions to this rule:

  • TCGA92/S71 applies because of the death of the life tenant (see CG36450+). TCGA92/S257(3) preserves the operation of TCGA92/S73. This means the trustees are treated as disposing of the asset at market value but without accruing a chargeable gain. This will give the charity a market value acquisition cost if it is liable to Capital Gains Tax when it disposes of the asset.
  • Consideration has been given for the charity’s acquisition of the interest. This condition is aimed at various possible avoidance devices concealing what is really the sale of an interest under a settlement.
Examples
  1. Jack creates a discretionary settlement in favour of his grandchildren with a charity named as the residuary beneficiary. TCGA92/257(3) applies. When the last grandchild dies the trustees of Jack’s settlement are...

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