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HMRC internal manual

Capital Gains Manual

2006 IHT changes: CGT treatment before 22 March 2006

For CGT there is in particular a disposal:

  • when assets are transferred into a settlement, even though the settlor has retained some kind of interest (See TCGA92/S70),
  • when an individual beneficiary becomes absolutely entitled as against the trustee (See TCGA92/S71 (1)),
  • when the trustees of one settlement become absolutely entitled as against the trustees of another (see Hoare Trustees v Gardner 52TC53), and
  • when legislation specifically provides that there is deemed to be a disposal, for example TCGA92/S72, where a person with an interest in possession dies, and the property continues to be settled.

But there are many situations where the chargeable gain is reduced or eliminatedbecause of a relief or exemption.

If there is an allowable loss restrictions on the use of the loss apply if the transferorand transferee are connected persons. See TCGA92/18 (2) and TCGA92/286 (3), and CG14561.

Where a person with an interest in possession in settled property dies:

  • to the extent that it continues to be settled property there is a deemed disposal and reacquisition by the trustees at market value, but no chargeable gain or allowable loss, see CG36450 and TCGA92/S72. This bullet and the next describe what is known as the “death uplift”;
  • to the extent that it ceases to be settled property the disposal under section 71(1) generates neither chargeable gains nor allowable losses, see CG36454 and TCGA92/73;
  • if the settled property had passed into trust subject to a hold-over claim, the above exemptions are lifted, but the chargeable gain is restricted to the amount held-over, see TCGA92/S74. This chargeable gain can itself be held-over provided it is a chargeable transfer for IHT. See CG36510.