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HMRC internal manual

Capital Gains Manual

Interests in possession: introduction: death and trusts: special provisions

TCGA92/S72, TCGA92/S73, TCGA92/S74

There are two main provisions which apply on the death of a person with an interest inpossession.

  1. If the property continues to be settled property, the trustees are treated as disposing of the settled property and reacquiring it at market value on the date of death, but without any charge to tax except for the clawback of held-over gains, see CG36450.

  2. If someone becomes absolutely entitled to the property, see CG37010, on the occasion of the death of the person with the interest in possession, the trustees are deemed to have disposed of it at market value and reacquired it as bare trustees for the person so entitled. However to the extent that the property concerned is property which was subject to the interest in possession, there is no chargeable gain on that occasion, see CG36454.

With effect from 22 March 2006 these provisions only apply in certain circumstancesdescribed in CG36525+. Otherwise:

  1. If the property continues to be settled property there is no effect for Capital Gains Tax.

  2. If a beneficiary becomes absolutely entitled then there is a deemed disposal at market value under s.71(1) TCGA, see CG37500.