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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Bare trusts: main principles and effects: example

Mr A dies on 1 June 1990. In his will he leaves to X (who is then aged 14 years) 1,000 shares in P Ltd at a probate value of £850. Because X is a minor, the legal title to the shares is held by the trustees of the will. In this situation, see CG33504, TCGA92/S60 applies and for CGT purposes we disregard the trustees.

On 1 December 1991, the shares are sold for £1,000.

The gain of £150, less indexation, in 1991-92 is charged as a gain of X, see AP140.

The proceeds are reinvested in shares in Q Ltd which appreciate to a market value of £1,600 on 1 May 1994, which is X’s 18th birthday. The trustee then hands over the shares.

The transfer of the shares in Q Ltd by the trustee to X is not a `disposal’ but if X himself then immediately sells the shares, the gain will be computed by reference to the acquisition price of £1,000.

NOTE. If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998. For indexation allowance see CG17207+ and for taper relief see CG17895+.