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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Basic terms of trust law as applied to CGT: sub-fund settlements: basic effects for CGT: losses

TCGA92/S71(2)

CG37203 explains the position with regard to any allowable losses which arise on anoccasion falling within section 71(1).

Although the legislation refers to a beneficiary, this term is defined as “aperson” who “becomes absolutely entitled as against the trustee.” Soalthough one would not normally regard the word “beneficiary” as describingtrustees of a settlement, because they cannot as trustees have any beneficial interest,nevertheless section 71(2) does apply in this situation.

So the allowable losses on the deemed disposal of any assets which the trustees of thesub- fund settlement are treated as acquiring can be used against gains on certaindisposals of the assets to which they have become absolutely entitled, but not otherwise.