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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Interests in possession: protective interests

Under Section 33 Trustee Act 1925 and Section 34 Trustee (Northern Ireland) Act 1958,where income is directed to be held on protective trusts for a beneficiary [`the principalbeneficiary’] for a particular period, the property is held on the following trusts:

  1. On trust for the principal beneficiary during that period, but

  2. If a relevant event occurs, which is usually bankruptcy or an attempt to assign the interest, upon discretionary trusts for the principal beneficiary, spouse, civil partner and issue.

So long as a) applies, it is an interest in possession, but once b) applies it is not,and therefore TCGA92/S72 (1) and TCGA92/S73 could not then apply. This is by way ofcontrast with the Inheritance Tax provisions in IHTA84/S88, which treats the property ascontinuing to be held on interest in possession trusts. This is subject to the point thatthis would only be true from 6 April 2006 if the rules described in CG36525 onwardstreated it as subject to the interest in possession provisions previously.