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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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2006 IHT changes: IHT and CGT treatment before 22 March 2006: miscellaneous situations

There were various other situations which need to be mentioned but cannot readily be setout in table form.

Events occurring inside a settlement.

  • There was a chargeable transfer for IHT if a trust with a deemed or actual IIP trust, or an A&M trust became a trust with neither a deemed nor actual IIP.
  • There was a chargeable transfer for IHT if a trust with neither a deemed nor actual IIP became a trust with an actual or deemed IIP or an A&M trust.
  • There was no charge where an A&M trust became an IIP trust, typically where a beneficiary became entitled to an IIP on reaching 18, but would not get his share of capital until and unless he reached the age of 25.
  • There was a deemed chargeable transfer where an Other non-IIP trust reached the tenth anniversary of its creation (whatever its class then) and every ten years thereafter.
  • Depending on the assets there was a chargeable transfer in any case where the settlor of a trust subject to the gifts with reservation rules for IHT died, and where the reservation ends and it was an Other non-IIP trust.

As assets remained in the same settlement for CGT purposes there was generally nodisposal for CGT purposes on any of these occasions unless bullet (v) above brings thesettlement to an end, for example because it only lasts while the settlor is alive, orexceptionally it triggered a deemed disposal.

Transfers from one settlement to another

  • There was a chargeable transfer for IHT if assets held on deemed or actual IIP trusts were transferred to be held on trusts in another settlement without a deemed or actual IIP.
  • There was a chargeable transfer for IHT if assets held on Other non-IIP trusts were transferred to another settlement to be held on deemed or actual IIP trusts unless it occurred within 90 days of a ten year charge.
  • There was no chargeable transfer if a trust without an actual or deemed IIP transferred assets to another such trust. For the purposes of the ten year charge they were treated as held in the original settlement, by reason of IHTA84/S81 (and continue to be so treated if appropriate).
  • Transfers between settlements of property held on actual or deemed IIP trusts to be held on other such trusts were Potentially Exempt Transfers unless the same person or his spouse or civil partner had the interest in possession in both, in which case there was no chargeable transfer.

There was always a disposal for CGT if assets passed from one settlement to another.

If there was a chargeable transfer TCGA92/S260 (2)(a) could apply unless a settlor, hisspouse or civil partner could or did benefit from the receiving settlement.

If the assets qualified then TCGA92/S165 could apply unless a settlor, his spouse or civilpartner could or did benefit from the receiving settlement.

The restrictions in the last two subparagraphs only applied to disposals after 9 December2003.

IHTA84/S144

This applied where property comprised in a person’s estate on his death wassettled by will, but no interest in possession had yet subsisted. If within two years ofdeath assets were appointed to an individual or on an interest in possession, theappointment was treated for IHT purposes as if comprised in the will. Therefore it was notin itself a chargeable transfer.

If this was regarded as a disposal by the trustees for CGT purposes TCGA92/165 may apply,but TCGAS92/260 (2)(a) cannot.

General note

TCGA92/S165 is only available for certain assets.

S165 and S260 do not apply to transfers after 9 December 2003 to settlements where thesettlor or spouse or civil partner can or do benefit.