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HMRC internal manual

Capital Gains Manual

Gifts in settlement: transfer into settlement


When assets are put into trust, either on the formation of a trust or by way of addition to trust property, TCGA92/S70 provides that there is a disposal at market value by the disponor of the property to the trustees, with a consequent gain or loss to the person making the disposal [“the disponor”], notwithstanding that

  1. the gift is revocable, or
  2. the disponor retains an interest in the property, or
  3. the disponor is a trustee of the settlement.

The whole property is deemed to be disposed of at market value, notwithstanding that the disponor has some interest as a beneficiary in the settlement. For example, he or she might have disposed of a freehold dwelling-house by gift to trustees but have reserved for themselves a life tenancy of it. In this case the whole of the property becomes settled property and in valuing it on that occasion the life interest retained must be disregarded.

Where, however, all that the disponor owns is the lease of a house which is given to the trustees, the `whole property’ is the lease. The same applies where the disponor grants a lease to the trustees. This is a part disposal. See CG70950.