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HMRC internal manual

Capital Gains Manual

Excluded cases Income Tax and CGT

For income tax:

The special treatment does not apply if the property in question is property in which the settlor is regarded as having an interest for the purposes of ITTOIA/S624 and S625, (FA2005/S25(3)).

For CGT:

The special treatment does not apply if

  • the vulnerable person dies during the year, see FA 2005/S30(3),or
  • the trustees would not be chargeable to CGT in respect of the chargeable gains. See FA2005/S30(1)(b). This restriction is particularly relevant for the years 2004-05 to 2007-08 if section 77 TCGA (settlor-interested settlements, see CG34700+) applied to tax the settlor and not the trustees. However, if the only reason for the trustees not being assessed is that the case falls within TCGA92/S77(2A), a settlement under which a minor child of the settlor can benefit, the special treatment is not excluded and the beneficiary is assessed instead of the settlor.

The reference to the trustees not being chargeable is a reference to their having no net chargeable gains. If their chargeable gains are less than the annual exempt amount the special treatment does apply as such gains are still chargeable to CGT.