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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Non-retrospective variations: disposals not for valuable consideration

If the variation is not made for valuable consideration then the non-retrospective deed of variation is not a good assignme of the future chose in action, see CG32000. Accordingly the assignee only acquires chargeable assets from the original leg at the date the assets vest. The assignee then acquires them market value at that date.

Because the original chose in action is personal to the legatee and is not disposed of despite the variations that have occurred, the transfers of assets that are made by the personal representatives when the assets vest are transfers to the legatees. As a result TCGA92/62 (4) applies so that the transfers are not disposals by the personal representatives for Capital Gains Tax purposes. There is therefore no charge to Capital Gains Tax on the personal representatives when the assets vest in these circumstances.

On a purchase for cash the cost of this chose in action is the sum paid. However if the valuable consideration is the giving up of rights to pursue court action the cost must be equal to the market value of the consideration received by the legatee. The basis used to arrive at that figure is set out in CG31980. The same principles should be applied in arriving at the assignee’s figure of cost for this chose in action.

When the assets vest from the estate, the assignee makes a disposal of the chose in action acquired at the date of the variation. The disposal consideration is the value of the assets delivered to him by the legatee. A Capital Gains Tax computation must therefore be carried out at this time using the total value of all the assets, both chargeable and non-chargeable, vesting from the estate as the assignee’s disposal consideration. This may give rise to a chargeable gain or allowable loss to the assignee.