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HMRC internal manual

Capital Gains Manual

Absolute entitlement: main occasions: agreement to terminate trust

Where settled property is held under successive limitations, for example, to A for life and to B and C absolutely, and all the parties are alive and under no legal disability (such as infancy), they may agree upon a scheme of distribution with the trustee(s) or may together direct the trustee(s) to distribute the property in a particular way. When agreement is reached, the property ceases to be settled property, and the occasion of charge on the trustee(s) under TCGA92/S71 (1) is the time when the scheme of distribution has been agreed. This is the proper treatment even if the trustees retain certain assets to cover the potential future Inheritance Tax liability if the life tenant dies within seven years.