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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
, see all updates

Insolvency: introduction

General instructions relating to bankruptcy etc, arrangements and the associated procedures are at INS1300 +.

TCGA92/S66

The broad effect of TCGA92/S66 is that where, in cases of insolvency, assets vest in a trustee, the transfer of assets from the insolvent to the trustee or vice versa is disregarded for Capital Gains Tax purposes.

Section 66(1) provides that a trustee or assignee in bankruptcy or a person who holds assets under a deed of arrangement is to be treated as a nominee, see CG34300+, of the bankrupt or debtor. This means that you disregard for Capital Gains Tax purposes the vesting of assets in the trustee or assignee or the re-transfer of assets to the debtor.

Under Section 66(4), property held by a trustee in bankruptcy or under a deed of arrangement is not to be treated as ‘settled property’ within TCGA92/S68. Chargeable gains accruing on disposals of the property are assessable on, and the tax (computed by reference to the bankrupt’s or debtor’s circumstances) is recoverable from the trustee or assignee (In re McMeekin, a bankrupt, (48TC725)). The trustee or assignee should include any liability to Capital Gains Tax in a personal return and not a trustee’s return.

Death of bankrupt

TCGA92/S62 (1), TCGA92/S66 (1) - (3)

Where the bankrupt or debtor dies while any of his or her assets are vested in a trustee or other person, TCGA92/S66(1) ceases to apply after his or her death. For the purposes of TCGA92/S62(1), see CG30300+, the assets should be deemed to be acquired by the trustee or other person as if he or she were a personal representative (TCGA92/S66(2)).

Similarly, where the assets of a deceased person are vested in a trustee in bankruptcy after the death, for example following a successful petition of creditors, the trustee should be treated as the personal representative of the deceased (TCGA92/S66(3)) and as if the property devolved on the trustee at the death.