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HMRC internal manual

Capital Gains Manual

Death of person with interest in possession: examples

In 1992, a settlor settled on trustees land having a market value of £100,000. A claimwas made by the settlor under section 165 of TCGA, and the held-over gain was £30,000, sothat the trustees are treated as acquiring the land for £70,000. The land was subject toa life interest in one quarter of the income. The life tenant died in 1998 when the valueof the land was £150,000. The land ceased to be settled property on the death and thetrustees are deemed to dispose of the land for £150,000. The chargeable gain of say£50,000 after indexation would be reduced under TCGA92/S73 (2) by one quarter to£37,500, but that reduction is diminished by one quarter of the held-over gain, £7,500,so that the amount assessable is £45,000.